Cotton prices soared to a two-year high only for support
from lower-than-expected US ginnings data to fade, leaving futures in a retreat
which raised ideas they might again have set a high in March.
Cotton futures for May soared 3.4% to 97.35 cents a pound in
early deals in New York, the highest for a spot contract since February 2012,
on strength attributed to follow-through buying from US Department of
Agriculture statistics showing ginnings from last year's domestic crop at 12.9m
That was below the 13.2m bales at which the USDA has
estimated the harvest.
"In other words, the lowest US crop in four years was
actually even lower than previously assumed," Commerzbank said.
"This confirms a concern that has been plaguing the market
for some time - high-quality US cotton is in short supply at present."
Even before the ginnings data, the USDA "had already assumed
that US stocks would decline to a very low level by the end of the season", of
A simple pass through of the lost 300,000 bales implies
year-end inventories in the US, the top exporter, at 2.5m bales, the lowest
figure bar one on records going back to 1965.
'Ran out of willing
However, the May contract retreated in later deals to hit
90.83 cents a pound at one point, down 3.5% on the day, behaviour which led broker
Keith Brown to suggest that the market had followed a historical pattern of
setting highs, or at least "halts", in March.
"It looks like we ran out of willing buyers at these higher
levels," Mr Brown, of US-based Keith Brown & Co, told Agrimoney.com.
"The market is now coming down like water to find its
"It looks like we might have set a top up there. In the last
few years, March has very often seen the peak of the market. We may be seeing
an anniversary trade."
Last year, cotton futures, on a front month basis, peaked on
March 15 at 93.93 cents a pound.
And while 2012 did not see a March rally, 2011 saw prices
peak on March 7 at the record high of 227.00 cents a pound.
In 2010, while March did not witness a year-high it did mark
the end of a strong rally, heralding a sideways market through the summer.
However, seasonal forces this year may yet be trumped by US
Department of Agriculture data, with the release on March 31 of acreage estimates,
over which there are considerable uncertainties for cotton.
While the USDA has forecast 11.5m acres, Informa Economics
on Tuesday came out with an estimate of 10.955m acres.
"There has been a lot of talk of up to 13m-14m acres," Mr