Cotton for March delivery advanced as much as 3.3 percent to $1.1546 a pound on ICE Futures U.S. in New York and traded at $1.154 at 2:40 p.m. Tokyo time. The most-active contract dropped 9.3 percent last week, the most since February 2009. Before today, prices had plunged 26 percent since reaching a record on Nov. 10.
“The prices have had enough correction from the peak,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. “Negative issues, including China’s measure to curb speculation and inflation, have already been factored into the market and investors are focusing on demand amid tight supply.”
Cotton for September delivery rose as much as 1.4 percent to 25,050 yuan ($3,755) a metric ton before trading at 24,955 yuan on the Zhengzhou Commodity Exchange. The Zhengzhouexchange would raise margin requirements for cotton, rice and sugar contracts to 12 percent at the settlement today, the bourse said Nov. 24. Trading limits were widened to 7 percent, it said.
China, the world’s fastest-growing major economy and biggest cotton user, has pledged to control prices and may raise interest rates again to limit inflation. Guotai Junan Securities Co. predicted as many as three increases in borrowing costs by June 30.
“To control inflation, China may increase its purchases from overseas,” Han said. “The problem is how much stockpiles in the U.S. are available for export.”
China Output Decline
Cotton futures in New York have jumped 51 percent this year, touching an all-time high of $1.5195 a pound in November amid surging demand from China and plunging inventories in the U.S., the leading exporter.
China’s cotton output may fall 5.5 percent this year to 6.36 million metric tons after rain and cold weather damaged crops, research company Cncotton.com has said.
Demand in China is forecast to outpace supply by 17 million bales in the year ending July 31, the U.S. Department of Agriculture has forecast. Stockpiles in the U.S. are predicted to fall to 2.2 million bales this season, down 25 percent from 2.95 million last year. A bale weighs about 480 pounds (218 kilograms).
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