Cotton prices reached an all-time peak on Friday as inventories dropped amid growing demand in Asia.
In New York, ICE December cotton futures touched 1.1980 dollars a pound, exceeding the previous record set in 1995.
"Continued robust Asian demand-and Chinese import demand in particular-coupled with supply-side problems and the marked decline in stocks has underpinned the rally," said Barclays Capital analyst Sudakshina Unnikrishnan.
Cotton prices have pushed up in recent months, impacted by a drop in production in Pakistan following devastating floods and a severe monsoon season in India. The two countries are among the world's largest cotton producers.
China's commercial cotton inventory, or stockpiles held by non-government entities, was 107,000 metric tons in September, 98,000 tons lower than the previous month, the China Cotton Association said on its website today. Xinjiang, the nation's largest producing region, has sold almost all of the crop harvested last year, the association said.
"The figures announced are a confirmation" of market speculation that supply is getting tighter in China, Chung Yang Ker, an analyst at Phillip Futures Pte., said by phone from Singapore today. "The government may do something to relieve the market, like increasing imports."
The crop condition in the US, the world's largest exporter, deteriorated in the week ended Oct. 10, with 55 per cent in good or excellent condition, from 56 percent a week earlier, the U.S. Department of Agriculture said on Oct. 12.
The USDA lowered on Oct. 8 its forecast for China's cotton output to 31.5 million bales, from 32.5 million bales a month earlier. The department also cut its estimate of the country's inventory for the end of the 2010-2011 marketing year because of higher demand. A bale weighs 480 pounds (218 kilos).
Another report from Tashkent adds, Uzbekistan, the world's third largest cotton exporter, said Wednesday it had put up for sale over 600,000 tonnes of cotton fibre this year in a bid to capitalise on soaring global prices.
"Uzbekistan has put up 600,000 tonnes of cotton fibre for sale from this year's crop," the Central Asian state's ministry for foreign economic relations said in a statement.
Uzbekistan's Prime Minister Shavkat Mirziyayev touted the country's harvest at the opening of the Central Asian's state annual cotton fair, where officials expected to clinch export deals worth up to 500 million dollars.
He added however that his country planned to cut exports of raw cotton and cotton fibre in favor of developing its domestic cotton processing industry.
"We are planning to increase domestic processing of cotton to 70 percent by 2015," Mirziyayev said.
Industry experts said Uzbekistan held a favorable market position this year in light of poor harvests in many cotton exporting nations.
The country-selling primarily to China, Bangladesh, Iran, Pakistan and Russia-is expected to produce 1.1 million tonnes of cotton fibre this year, according to Uzbek officials.
Annual production in Uzbekistan, the world's sixth largest cotton producer overall, averages about 3.5 million tonnes of raw cotton and up to 1.2 million tonnes of cotton fiber.
-FE, Sat, 16/10/2010
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