US cotton futures finished Monday at its highest level in almost 150 years, spurred by tight supplies in the United States and in China as the market's rally shows no sign of slowing down soon.
Cotton prices staged matching rallies, with US fibre contracts hitting a record high after rising nearly 15 percent since January 14. The Chinese cotton market, on the other hand, gained over 11 percent since the middle of the month.
The key March cotton contract on ICE Futures US rose the 5-cent limit to close at $1.6194 per lb, with the low for the day at $1.605.
Volume though was at 14,800 lots, about a fifth below the 30-day norm, Thomson Reuters preliminary data showed.
In China, the key September cotton futures on the Zhengzhou Commodity Exchange was last done at 32,120 yuan per tonne, up 1,620 yuan on the day.
"The market's gone frenzied on Chinese demand, tight supply and fears of drought in the US," said Keith Brown, president of commodity firm Keith Brown and Co. in Moultrie, Georgia.
Chinese sales of cloth are expected to pick up in the spring amid tight domestic supplies, said Yang Guoqi, an analyst with Jinshi Futures.
Despite the high prices, a key US retailer said it should be able to absorb the escalation in cotton values.
J.C. Penney Chief Executive Myron Ullman said the company was in a strong position in terms of cotton cost increases and that it was done buying for the year.
In the United States, Brown said the deliverable supplies to the old-crop contracts such as March, May and July were very tight because the trade believes 95 percent of the US cotton crop has been sold. Only US cotton can be delivered at the exchange.
US cotton stocks deliverable against the ICE Futures US exchange stood at 123,853 bales as of January 21, down almost 90 percent from the 2010 top of 1.08 million bales in early June, exchange data showed.
Brown said Chinese firm are apparently buying cotton at this time ahead of the Lunar New Year because they feel prices will head higher.
He added there is also growing concern about the very dry conditions being caused by the La Nina weather anomaly in places such as Texas, the top cotton-growing state.
Analysts said the market would be waiting for further leads in the coming days, but attention should gradually turn toward US 2011 cotton 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 at the industry group's annual meeting in San Diego next week.
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 five-year high and an increase of around 15 percent from last year's 11.04 million acres.