Cotton Prices Surge by N.Y. Exchange Limit on Dollar’s Slide

By Shruti Date Singh

Nov. 24 (Bloomberg) -- Cotton futures rose the most allowed by ICE Futures U.S. as the dollar tumbled and commodities rallied after U.S. President-elect Barack Obama named his economic team and Democrats promised another stimulus package.

The dollar fell as much as 2.7 percent against a weighted basket of six major currencies. The Reuters/Jefferies CRB Index of 19 raw materials jumped as much 5.4 percent. U.S. equities climbed after a U.S. government rescue of Citigroup Inc. boosted investor confidence.

“The dollar index down over 200 points, strong outside markets, general optimism over the Citibank situation and Obama’s economic team” supported cotton prices, Mike Stevens, an analyst with Swiss Financial Services in Mandeville, Louisiana, said in an e-mail.

Cotton futures for March delivery rose 3 cents, or 7.2 percent, to 44.8 cents a pound on ICE Futures U.S. in New York, the highest close for a most-active contract since Nov. 4.

Congress will send Obama an economic stimulus package on Jan. 20, the day he takes office, Democratic lawmakers said. Obama said he will nominate New York Federal Reserve Bank President Timothy Geithner as Treasury secretary.

Cotton has dropped 34 percent this year on concern that exports from the U.S. will decline as the recession reduces demand for textiles and clothing.

Rallies by corn, wheat and soybean futures today may support cotton, said Ron Lawson, a managing director at Lawson O’Neill Global Institutional Commodity Advisors LLC in Sonoma, California.

The crops compete for land in the U.S., and farmers planted 13 percent fewer acres with cotton in 2008 as grain and oilseed prices rose to records.

Wheat futures soared as much as 12 percent in Chicago. Corn rose as much as 6.9 percent, and soybeans gained as much as 7.1 percent.

Citigroup, the second-biggest U.S. bank by assets, got a government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital.

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