Rising cotton futures top $2 mark

Last week, the cotton market reached a milestone when May 2011 cotton futures topped the $2-a-pound level.

This comes just a few months after cotton futures passed the dollar-a-pound mark, which had elicited a collective gasp of surprise and excitement across the Cotton Belt, according to Southeast Farm Press.

By the end of last week, cotton futures for May 2011 had opened at a high of about $2.08 per pound, according to the IntercontinentalExchange.

Market analyst O.A. Cleveland says the news behind the high prices is China’s insatiable appetite for cotton.

“My first impression is the Chinese domestic consumption is considerably higher than the USDA estimate (about 48 million bales),” he told the publication.

“The Chinese continue to buy cotton backed up by what we know to be a very strong, and rapidly growing, middle class,” Cleveland added. “Apparently, their textile mill ‘demise’ isn’t as has been reported. They’re now probably looking at 51 million to 52 million bales being consumed. That demand is just incredible.”

In addition, US domestic consumption – even with these high prices – is on track to reach above last year’s level, Southeast Farm Press added.

“The excess cotton supplies we saw in 2007 – record world supplies – have now been depleted due to reduced plantings,” Cleveland said. “Now, cotton will continue to compete aggressively for acres and try to match whatever grains do.”

High cotton prices could push US plantings to the 13-million acre mark, added Cleveland.

“Growers will be a little slower to return to cotton,” he said. “Their biggest concern is whether cotton will be competitive next year? That’s the right question to ask and the answer is absolutely, it will.”

As a result of spiraling futures, costs may rise for US retailers including Gap Inc. and J.C. Penney Co., Bloomberg reported. Olah Inc., a US apparel manufacturer that supplies Gap, said it raised prices for “several products.”