Cotton jumps as global supply falls on inclement weather

Cotton futures climbed to record levels after flooding in both Pakistan and Australia fueled investor worries that global supplies would be outstripped by demand. Cotton futures climbed to record levels after flooding in both Pakistan and Australia fueled investor worries that global supplies would be outstripped by demand. 

Pakistan is the world's fourth-largest producer of cotton, but inclement weather has caused a shortfall of 2.5 million bales, according to the nation's textile mills association; moreover, Tropical Cyclone Yasi is expected to wreak havoc on crops Wednesday in Australia's Queensland state and could cut crop yields - on top of the 300,000 bales that were lost last month. Cotton inventories monitored by ICE Futures U.S. have dropped 85 percent since the beginning of June, while prices have concurrently doubled on supply concerns.Pakistan is the world's fourth-largest producer of cotton, but inclement weather has caused a shortfall of 2.5 million bales, according to the nation's textile mills association; moreover, Tropical Cyclone Yasi is expected to wreak havoc on crops Wednesday in Australia's Queensland state and could cut crop yields - on top of the 300,000 bales that were lost last month. Cotton inventories monitored by ICE Futures U.S. have dropped 85 percent since the beginning of June, while prices have concurrently doubled on supply concerns.

Hiroyuki Kikukawa, the general manager of research at IDO Securities, told Bloomberg that supply and demand fundamentals are sending cotton higher. "At the moment, supply is extremely tight," he said. "Nothing can stop the current runaway price for the time being."Hiroyuki Kikukawa, the general manager of research at IDO Securities, told Bloomberg that supply and demand fundamentals are sending cotton higher. "At the moment, supply is extremely tight," he said. "Nothing can stop the current runaway price for the time being."

On ICE Futures in New York Wednesday, cotton futures for March delivery increased 2.3 percent, or 3.9 cents, to trade at $1.7615 per pound; the most-active contract jumped 4.5 percent in the past two sessions.  On ICE Futures in New York Wednesday, cotton futures for March delivery increased 2.3 percent, or 3.9 cents, to trade at $1.7615 per pound; the most-active contract jumped 4.5 percent in the past two sessions.