Cotton looks poised to hit 80 cents a pound for the first time in nearly two years, helped by a combination of tight supplies and investors' clamour for commodities, a leading analyst has said.

Cotton prices, which jumped 54% in 2009, continue to be favoured by "bullish fundamentals", William Adjadj at Sucden Financial said, noting waning hopes for production in China at a time when economic revival has stimulated demand.

However, dollar weakness and speculator interest in commodities were stoking interest beyond that which might be expected from cotton's supply-and-demand dynamics.

"We do not have anything of such historical note to support prices," Mr Adjadj told Agrimoney.com.

"Prices are not revealing the real value of [the commodity]. What we are seeing is the same trend as we have in sugar and other softs. Investors are very reluctant to go short."

Chicago cotton, which last touched 80 cents a pound in March 2008, stood 0.06 cents higher at 76.06 cents at 11:30 GMT.

Stocks slip

The comments come the day after the International Cotton Advisory Committee forecast global cotton inventories sliding by 7.7m bales (1.59m tonnes) to 49m bales (10.8m tonnes) by the end of 2009-10.

While demand is proving more resilient that many had expected during the credit crunch, and on track to rise by 2.3m bales to 109m bales, output hopes have been dented by disappointing harvests across the major producers.

US output has been hurt by rain-affected yields, and a switch by farmers to corn and soybeans, which have been more profitable in recent seasons.

In India, cotton deliveries between October 1 and January 2 were, at 12.65m bales, 1% down year on year.

"Productivity is expected to fall this year due to delays in sowing that were the result of late monsoon rains and droughts that hit some states, as well as flooding in October," Mr Adjadj said.

'Park some capital' 

Meanwhile, Chinese production data has signalled a crop lower than the 31.5m-bale harvest forecast by Washington statisticians.

"That should make cotton an attractive investment for traders who are looking for places to park some capital."

Monday's ICAC report also forecast global cotton production rising by nearly 10% to 111m bales in 2010-11.

Chinese output would rebound by 4.6m bales to about 35.4m bales, and US production by 10% to 13.8m bales, thanks to recoveries in plantings.