Cotton Prices Advance on Rising Export Demand, Soybean Rally

Cotton prices rose to an eight-week high in New York on signs that U.S. exports may increase and as soybean prices climbed, boosting the incentive for farmers to plant less fiber for a third straight year.

The U.S., the biggest cotton exporter, may ship 12.33 million bales in the year ending July 31, according to the average estimate of eight analysts in a Bloomberg News survey. The U.S. Department of Agriculture, which forecast export sales of 12 million bales last month, will update its projections tomorrow. Soybean prices rose as much as 2.2 percent in Chicago.

“We are still in a year with limited demand but we’ve gotten into a situation where some of the other countries’ internal prices are outpacing ours,” said Mike Stevens, an analyst for Swiss Financial Services in Mandeville, Louisiana. “Soybeans have been so strong. Soybeans have been the rising tide.”

Cotton futures for July delivery rose 1.48 cents, or 3.1 percent, to 49.39 cents a pound on ICE Futures U.S. in New York. The price earlier reached 49.44 cents, the highest for a most- active contract since Feb. 10.

Demand for U.S. supplies has increased as domestic prices for cotton rose in China and India, the two largest producers and consumers of the fiber, Stevens said.

U.S. cotton has been in the Cotlook A Index since Feb. 18, according to Cotlook Ltd. The index averages the five lowest prices for global cotton supplies available in Far East ports. Two of the five prices in the index today are from the U.S. while the other three are from Africa, according to Cotlook.

U.S. farmers will cut acres seeded with cotton by 7 percent to 8.81 million this year to plant more grains and soybeans, the USDA forecast on March 31. That would be the lowest cotton acreage since 1983, the USDA said.

Cotton also rose today because traders and investors are rolling out of the May contract and buying futures for delivery in later months, Stevens said.

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Source:bloomberg