Cotton prices climbed back near 10-year highs in New York on bets that strong demand will keep supplies constrained. Arabica coffee surged on sinking Brazilian exports.
Hedge funds are actively buying cotton, which means this year’s commodity index rebalancing may be positive for the market, said Louis Rose, director of research at Rose Commodity Group. Money managers boosted their net-bullish bets on the fiber through Dec. 28 to a one-month high, government data showed.
“We still believe that such buying is, at least partially, rooted in the stark lack of ICE-certified stocks,” Rose said. The U.S. “continues to sell decent volumes of cotton,” mostly to China, Turkey, Vietnam and Pakistan. Sales “remain dramatically ahead of the average expected pace for this point of the season.”
March futures jumped as much as 3.9% to $1.1768 a pound in New York, the highest for a most-active contract since Nov. 17. It settled at $1.1639. The urgency to obtain supplies is reflected in a rare premium the contract is commanding over May futures, which is near a record.
Meanwhile, a measure tracking Chinese manufacturing rose for a second month in December, after falling for most of last year. That’s another bullish sign for cotton, as China’s the top user. It points to a “healthy pick-up in commodity demand,” Kieran Clancy, commodities economist for Capital Economist, wrote in a report.
The fiber’s price rose 44% last year, the most since 2010, as global bottlenecks hampered supplies amid projections for a second straight deficit.
