U.S. cotton prices are surging ahead

By Tom Stundza -- Purchasing, 3/12/2008 9:03:00 AM

U.S. cotton prices are rising this month as global prices are the highest in a decade because world demand is exceeding supply for the second consecutive crop season. Based on trends during the first seven months of the current crop year, full-year prices will be higher, according to the latest market summary posted by the U.S. Department of Agriculture, even though seasonal new-orders bookings from domestic textile mill buyers are very light.

The Cotlook A Index of world cotton prices has averaged 70¢/lb so far in the 2007-2008 crop year begun last August. The price average is 11¢ higher than during the first seven months of the previous crop season. In fact, the price index average at the end of February is the highest since August of the 1997-1998 crop year, according to International Cotton Advisory Committee. This has set the stage for a rise in average spot cotton quotations in the U.S. from 71¢/lb in February to almost 77¢ so far this month. A year ago, the cotton program of the USDA’s Agricultural Marketing Service was quoting 49¢/lb.

As a result of the gap between world production and consumption, world cotton ending stocks are projected to decline this crop season by 9%, or 1.1 million tons, to 11.5 million tons. But some analysts say it could slide as low as 10.7 million tons, further boosting spring and summer prices.