Cotton Price Delivery May Spike in US Market

Cotton for May delivery spiked after the release of official U.S. export sales numbers. Cotton for May delivery popped 3.5% to $2.09 a pound. The government reported sales of 331,100 running bales, up noticeably from the previous week and the prior 4-week average -- largely attributable to China and India. The countries imported 116,700 and 150,200 running bales of cotton, respectively.

"Official U.S. cotton export sales for last week were a real "eye-popper," said veteran cotton analyst Mike Stevens. He said most traders were bracing for cancellations and buybacks.

Stocks with cotton exposure, such as apparel were trading mixed, with Gap(GPS_) rising 2.3% to $22.52 and Wet Seal( WTSLA ) falling 1% to $3.59.

Prices of cotton in the international market would continue to stay high for some more time, a top official of Liverpool-based International Cotton Association (ICA) said today.

"The rising prices of cotton at International market are not an aberration, but beacuse of the huge demand for quality cotton. It would stay at higher level for some more months," ICA president Ray Butler said.

However, the prices are expected to ease after the arrival of new crop, which could be only in the month of October-November, depending on the volume of the world cotton output, Butler said on the sidelines of a seminar on cotton organised jointly by South India Cotton Association and Southern India Mills Association, also for an interaction with ICA delegates.

When asked about the projected world cotton crop in 2011-12, he said that it could be around 27.6 million tonnes, an increase of 3.5 million tonnes over the production of 2010-11 and the consumption would also likely to witness an increase by 4.4 per cent to about 26.4 million tonnes.

On India's contribution to the world cotton market, Butler said that since the country itself required huge quantity of cotton, both for domestic consumption and for exports, India has to depend on imports in near future, particularly for quality cotton.

When asked about opening an arbitration centre or cotton-testing laboratory in India, particularly down South, which consumed more than 50 per cent of the cotton required in the country, Butler said that ICA was aiming to open such centres across the world and there was no (no) reason why South India should be omitted.

The suggestion from a few cotton users to open a testing lab in Coimbatore would be put forward for consideration of the ICA Board, Butler said.