US cotton futures rallied the 4-cent daily limit on Friday on fund and speculative buying sparked by an overnight surge in Chinese cotton values, analysts said. The key March cotton contract on ICE Futures US rose the 4-cent limit to trade at $1.5694 per lb at 10 am EST (1500 GMT), with the session low at $1.5372. In China's Zhengzhou Commodity Exchange, the May cotton futures contract was last done at 30,510 yuan per tonne, up 1,085 yuan on the day.
"The Chinese market was extremely strong overnight," Mike Stevens, an independent cotton analyst in Mandeville, Louisiana, said when asked about the reason for the surge in US cotton values. US cotton futures are now close to taking out the all-time record of $1.5912 set on December 21, 2010. Cotton is apparently extending a historic rally that began in July in reaction to tight supplies, strong mill demand and fund buying for a commodity that investors had felt was undervalued.
Traders said that, with most of the US 2010/11 cotton already sold, and given the fact that the United States is the world's top cotton exporter, a supply squeeze is going to hit old-crop cotton contracts, such as spot March, second-position May and third-position July. Analysts said the market would be waiting for further leads in the coming days, but attention in the market should gradually turn toward spring plantings.
The market will be waiting for the closely watched cotton potential plantings survey by the National Cotton Council. The results of the survey will be handed out on February 4 at the industry group's annual meeting in San Diego. A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings at around 12.48 million to 12.53 million acres, which would be a 5-year high and an increase of around 15 percent from last year's 11.04 million acres.
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