US cotton futures settled higher on Tuesday for the second day running on speculative buying inspired in part by stronger Chinese prices, with no sign speculative bulls are done rallying fibre contracts. Cotton futures had risen over 22 percent in a fresh rally that began in the middle of January, with Chinese cotton futures matching the rally in the US market.
The rally has made cotton the early leader of commodities in the Reuters-Jefferies commodity index in 2011, as it rose almost 20 percent year to date. In 2010, cotton was the best performing commodity as it went up over 90 percent. The key March cotton contract on ICE Futures US rose 3.78 cents or 2.2 percent to settle at $1.7222 per lb, dealing from $1.6923 to daily limit up at $1.7244.
Total volume stood around 26,800 lots, about 40 percent above the 30-day average, Thomson Reuters preliminary data showed. "It's a one-way street for the specs," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
The speculative accounts are driving fiber contracts higher in part because some mills are short on supplies and they would need to cover those shorts in old-crop contracts in a few weeks' time, analysts said. Some traders said gains in Chinese cotton futures gave the market an early boost. The key September cotton futures on the Zhengzhou Commodity Exchange hit a new lifetime peak at 33,790 yuan per tonne and was last done at 33,725 yuan, up 1,080 yuan on the day.
The market's rise may also be in anticipation of some disappointment at US 2011 cotton plantings. Industry group the National Cotton Council of America will release its annual plantings survey for cotton at its annual meeting in San Antonio, Texas on Friday. A Reuters survey at the Beltwide Cotton conference this month had forecast US 2011 cotton plantings from 12.48 million to 12.53 million acres, a 5-year high and an increase of around 15 percent from last year's cotton sowings of 11.04 million acres.
The US is the biggest cotton exporter in the world and such a rise in plantings is seen by some in the trade as not enough to sate global cotton demand. On top of the US cotton sowings increase, China's cotton planting area will likely rise 9.8 percent in 2011 from the same period last year, the China Cotton Association forecast.