Cotton Futures Rise on Bets U.S. Farmers May Reduce Plantings

By Shruti Date Singh

Oct. 27 (Bloomberg) -- Cotton prices rose, rebounding from the lowest since February 2005, on speculation U.S. farmers may sow fewer acres with the fiber next year to plant more- profitable crops such as soybeans.

U.S. farmers planted 9.41 million acres with cotton this year, down 13 percent from 2007, to grow more soybeans as the oilseed rose to a record in July. Investors often buy and sell cotton together with soybeans, corn and wheat because the crops compete with each other for acres in the U.S., the largest exporter of the fiber. Soybeans rose 3.5 percent today.

``It's definitely spillover from the soybeans,'' said Jim Lambert, director of business development at Globecot in Nashville, a unit of FCStone Group Inc. ``Cotton is the most likely candidate to lose acreage.''

Cotton futures for December delivery rose 0.87 cent, or 1.9 percent, to 47.1 cents a pound on ICE Futures U.S. in New York.

Cotton also may be rising because investors and traders are buying futures to close bets that prices will fall further after the December contract touched a its lowest level today, said Mike Stevens, an analyst with Swiss Financial Services in Mandeville, Louisiana. The price earlier reached 45.35 cents, the lowest for the current December contract and the cheapest for a most-active contract since February 2005.

A close above 49.1 cents may signal that cotton has reached a bottom, Stevens said.

Concern that a global recession may reduce demand for products made from the fiber has pushed prices down recently, Lambert said.

U.S. Shipments

The U.S. will ship 13 million bales of the fiber this marketing year, the Department of Agriculture said on Oct. 10, less than the 14.5 million forecast last month and trailing the 13.65 million bales shipped a year earlier, because of a slowing world economy. A bale of cotton weighs 480 pounds (218 kilograms).

The growth rates of the U.S. economy, the world's largest, and China's, the largest cotton consumer, are expected to slow this year. Economists expect the U.S. economy will grow 1.6 percent this year, down from 2 percent in 2007, while 9.9 percent growth is projected in China, down from 11.9 percent, according to Bloomberg data.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.