BLBG: Cotton Advances by Limit as USDA Predicts Inventory Decline to 14-Year Low
Dec. 14 (Bloomberg) --Cotton futures in New York soared by the daily limit for a second day, advancing to a one-month high after a government report estimated U.S. inventories will drop to a 14-year low.
Cotton for March delivery gained 5 cents, or 3.6 percent, to $1.4597 a pound, the highest price since Nov. 10, on ICE Futures U.S. in New York before trading at $1.4594 at 1:57 p.m. Tokyo time. The daily trading limit for cotton futures increased to 5 cents a pound today from 4 cents, according to the exchange.
U.S. stockpiles for the year ending July 31 will total 1.9 million bales, the lowest projected level since May 1996, when Bloomberg data begins, the Department of Agriculture said Dec. 10. That’s 14 percent lower than the November estimate. The U.S. is the world’s biggest supplier.
“Cotton prices have been underpinned by the U.S. forecast for declining stockpiles and China’s rising demand,” Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul, said today by phone.
Cotton prices have surged 93 percent this year, heading for the biggest annual gain since 1973. The fiber reached a record $1.5195 on Nov. 10 on signs that growers would struggle to meet mounting demand from China, the world’s biggest consumer.
Inventories held in warehouses monitored by ICE have plunged 72 percent this year.
The U.S. crop will be 0.8 percent smaller than estimated last month, the USDA said. Output will total 18.27 million bales in the harvest that is just finishing, down from the 18.42 million projected in November, the USDA said, lowering its estimate for the second straight month. The previous harvest totaled 12.19 million bales.
China Prices
China’s cotton price may not “strengthen” in the near term because of credit-tightening policies by the government, China National Cotton Reserves Corp., the state cotton reserve manager, wrote in a research report posted by state-owned Assets Supervision and Administration Commission today.
Cotton for September delivery rose as much as 3.7 percent from the previous settlement to 28,245 yuan ($4,245) a metric ton before trading at 27,970 yuan on the Zhengzhou Commodity Exchange at the 11:30 a.m. local-time break.
Demand in China is forecast to outpace supply by 17 million bales in the year ending July 31, according to the USDA forecast.
To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
