The benchmark December cotton contract on ICE Futures US jumped 2.4 percent to settle at 75.72 cents per lb. That was just 0.07 cent shy of its intraday high and its highest level since May 21, according to Thomson Reuters data. The two days of gains came as a relief to traders who watched the fibre contract trade within a one day's limit move throughout July due to an absence of speculative players and weighed down by lacklustre demand and plentiful supplies.
Sentiment has started to turn in favour of higher prices in recent days after the Indian government warned that the delayed monsoon will likely curb plantings and hurt output in the 2012/13 season. Some also attributed the gains to short-covering ahead of the much-anticipated US Agriculture Department's monthly supply/demand report on Friday, the first for the 2012/13 season.
Speculators turned net short in cotton for the first time since mid-June, in the week to July 31, US Commodity Futures Trading Commission data showed on Friday. The US government's forecast will be all the more dramatic due to the freak weather that has gripped key-producing nations. With soybean prices soaring due to the worst drought in over 50 years that has scorched the US corn belt, some farmers in the southern hemisphere are mulling switching into the more profitable grains and out of fibres, market participants say. Their next planting season will be in November.
The dry spell in Texas is also expected to hamper this year's harvest, traders have cautioned. Even so, the bears note there are plenty of stocks Cotton bucked the downward trend in the grains market on Monday after weekend showers in the US Midwest brought some mild relief to soybean crops. It drew some strength though from the euro which gained against the dollar on hopes the European Central Bank will take action to lower borrowing costs for Spain and Italy.
India cotton prices 7/8/2012
The cotton harvest in India, the world’s second-biggest grower, is poised to decline as the worst monsoon since 2009 parches fields and curbs planting, potentially cutting exports for the first time in three years.
The crop in Gujarat, the largest producer, may plunge as much as 30 percent in the harvest starting Oct. 1 from 12 million bales of 170 kilograms each a year earlier, said Hasmukhbhai Raval, chairman of the Gujarat State Cooperative Cotton Federation. The planted area in the state will probably slump by as much as 25 percent from 3 million hectares (7.4 million acres) in 2011-2012, he said.
Rainfall in some parts of Gujarat is as much as 81 percent below a 50-year average as more than 50 percent of India is threatened by drought, shriveling crops from rice to cotton and oilseeds. A smaller harvest would reduce exports, helping halt a decline in New York prices, which slumped 23 percent in the past year as demand slowed in China, the biggest consumer.
Global cotton production in the year that started Aug. 1 will drop to 24.878 million metric tons from a record 26.66 million tons in the year ended July 31, Birkenhead, U.K.-based industry researcher Cotlook Inc. said July 19.
The August-delivery contract on the Multi Commodity Exchange of India Ltd. climbed as much as 1 percent to 18,490 rupees ($334) a bale in Mumbai, the highest price since Feb. 6, before closing 0.3 percent lower at 18,260 rupees. The December- delivery contract fell 0.7 percent to 75.23 cents a pound on ICE Futures U.S. in New York.
The area under cotton nationwide may decline as much as 10 percent as rains were either below-average or delayed in Maharashtra and Andhra Pradesh states, the second and third- largest producers, said D.K. Nair, secretary general of the Confederation of Indian Textile Industry.
Planting covered 10.01 million hectares by Aug. 3, from a record 12.2 million hectares in the 2011-2012 season, according to the farm ministry. The harvest was an all-time high of 34.7 million bales, according to the Cotton Advisory Board.
Chinese Stockpiles
India’s cotton exports are set to decline next year because of the slump in global prices and as dry weather cuts yields, said Kishore Narne, head of research at Mumbai-based AnandRathi Commodities Ltd.
Exports are estimated at a record 11.5 million bales in the year ending Sept. 30 from 7.8 million bales the previous year, according to the state-run Cotton Advisory Board. The nation briefly banned exports to secure domestic supplies after shipments surged more than the 8.4 million-bale surplus the government estimated. The curbs were lifted after protests from growers, traders and China.
“Indian exports are likely to be significantly lower in the new season as the nation struggles with production due to the reduced monsoon,” said Keith Flury, an analyst at Rabobank International in London. “The international demand for cotton is expected to slip in the new season as the globe’s number one importer China is forecast to lower shipments as it currently is sitting on massive stocks.”
Global cotton consumption will be 23.17 million tons in the year starting Aug. 1, down from 23.53 million projected last month, the Washington-based International Cotton Advisory Committee said last week.
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