New York cotton jumps to 2-1/2 months high

Cotton futures rose for a second day on Monday, hitting two-and-a-half month highs, on mounting concerns about possible export restrictions out of India, the world's second-largest producer. "This is uncertainty over India's situation which is twofold, how much (production) are they losing and will there be an embargo (on exports)," said a Georgia-based broker.
The benchmark December cotton contract on ICE Futures US jumped 2.4 percent to settle at 75.72 cents per lb. That was just 0.07 cent shy of its intraday high and its highest level since May 21, according to Thomson Reuters data. The two days of gains came as a relief to traders who watched the fibre contract trade within a one day's limit move throughout July due to an absence of speculative players and weighed down by lacklustre demand and plentiful supplies.
Sentiment has started to turn in favour of higher prices in recent days after the Indian government warned that the delayed monsoon will likely curb plantings and hurt output in the 2012/13 season. Some also attributed the gains to short-covering ahead of the much-anticipated US Agriculture Department's monthly supply/demand report on Friday, the first for the 2012/13 season.
Speculators turned net short in cotton for the first time since mid-June, in the week to July 31, US Commodity Futures Trading Commission data showed on Friday. The US government's forecast will be all the more dramatic due to the freak weather that has gripped key-producing nations. With soybean prices soaring due to the worst drought in over 50 years that has scorched the US corn belt, some farmers in the southern hemisphere are mulling switching into the more profitable grains and out of fibres, market participants say. Their next planting season will be in November.
The dry spell in Texas is also expected to hamper this year's harvest, traders have cautioned. Even so, the bears note there are plenty of stocks Cotton bucked the downward trend in the grains market on Monday after weekend showers in the US Midwest brought some mild relief to soybean crops. It drew some strength though from the euro which gained against the dollar on hopes the European Central Bank will take action to lower borrowing costs for Spain and Italy.