Cotton futures set a fresh two-month high in New York, after a three per cent jump in prices in China overnight, encouraged by a downgrade to a key world supply forecast, and concerns over the crop losing out in farmers’ sowing plans. And prices were also gaining support from the rise in values of other crops, notably soybeans, which are rivals in US spring sowings programs.
Chicago soybean futures are providing a bit more support for the cotton market. Soybeans are one of the main competitor crops for cotton in the US South in terms of the battle for area in farmers’ planting plans. New York futures, which remain a little shy of year-ago levels, are also curtailing expectations of large crops in many other producing countries, such as Australia and Brazil, too.
Strong textile exports, especially of apparel and bed wear, have forced Pakistan's textile sector to look to imported cotton, especially from India, to make up for a significantly smaller domestic crop. The forecast for US carryout inventories was trimmed by one lakh bales. Prices are not conducive to large cotton crops around the world.
The rally in cotton is seen as gaining extra pace thanks to a scramble by speculators - who had bet on further price falls - to close short positions, putting extra buying power into the market.