US cotton futures charged to a fresh 150-year top on Thursday on combined fund and speculative buying and the market seemed poised to hit $2 a lb in the days ahead, analysts said. The key March cotton contract on ICE Futures US rose the 7-cent daily limit to trade at $1.8758 per lb, with the session low at $1.83.
Volume traded was heavy and it stood around 32,500 lots at 1:23 pm EST (1823 GMT), which was already 40 percent above the 30-day norm, Thomson Reuters preliminary data showed. "There's no end in sight for this (ralling) market," said Nick Gentile, chief of trading operations in Atlantic Capital Advisors in Jersey City, New Jersey. "Demand is outpacing supply, plain and simple," he said. Since the middle of January, cotton futures have climbed in valued by more than a third, bolstered by overseas mill buying seeking to lock up scarce supplies, dealers said.
The tightness has been aggravated by the fact that supplies of cotton from the United States, the world's top exporter, are practically gone. The trade estimates more than 95 percent of the crop of 18.32 million (480-lb) bales has been sold. "The market has truly reached runaway proportions," said Mike Stevens, an independent analyst in Mandeville, Louisiana.
He added talk of a dry spell in China, the top producer and No. 1 consumer of cotton, and the "fading" chance of Indian cotton exports gave the market impetus for its advance. "At this point, the question is when we go to $2, not if," a dealer said. The market will be looking toward the US Agriculture Department's potential plantings report on March 31 to see if the rally will prompt more American farmers to plant cotton in 2011.
The National Cotton Council of America, an industry group, said US 2011 cotton plantings will likely reach 12.5 million acres. Most analysts feel the real number is much higher because the NCC survey was conducted before the current rally in the cotton market. A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings at 12.48 million to 12.53 million acres, a 5-year high and an increase of around 15 percent from last year's sowings of 11.04 million acres.