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Cotton Futures Soar On Shortage Fears

Cotton futures soared on fears that this season’s U.S. plantings will drop significantly.

Texas growers could reduce cotton acreage by an estimated 25 percent.  A shortfall of that magnitude from the biggest U.S. cotton-producing state could boost prices in markets domestically and worldwide.

Total U.S. plantings are expected to fall by 19 percent, adding to cotton’s upward momentum.  The U.S. is the world’s biggest exporter of cotton.

Behind the drop in plantings is a move by Texas farmers and other U.S. growers to more profitable crops, according to a report from Gaylon Morgan, a specialist at Texas A&M AgriLife Extension Service.

Since cotton hit a 31-month bottom last June 4, the fiber has climbed 31 percent, and analysts foresee a lot more upside potential.

The May delivery price for cotton spiked 3.1 percent to a high of 84.38 a pound at 2:30 p.m. on the ICE.  The gain was the biggest one-day advance since October 17.

Cotton prices are on track for four consecutive monthly advances, and were up 1.7 percent in February.

Net long positions in cotton increased during the week ending February 12, reflecting the strongest bullish sentiments of commodity traders, speculators and end users since October, 2010.

Despite cotton’s bullish prospects, with some 52 percent of world cotton supplies in Chinese warehouses, as of July 31, prices are unlikely to reach $1 a pound, say commodity analysts.

“…ICE cotton prices [should range] between 80 cents and 90 cents in 2013,” said Aakash Doshi, an analyst with Citigroup, in a report.