Cotton Rises on Signs of Textile-Mill Demand After Price Slump

By Yi Tian

Nov. 26 (Bloomberg) -- Cotton futures rose to the highest in three weeks on speculation that textile mills are stocking up on supplies after prices this month tumbled to the lowest in six years.

Mills in countries such as China, India and Turkey had reduced purchases as the global recession slashed demand for textiles and clothing. On Nov. 12, cotton touched 39.23 cents a pound, the lowest since June 19, 2002.

“It does appear that at least for the near term, a bottom has been made,” said Rogers Varner, the president of Varner Brothers in Cleveland, Mississippi. “It may be that merchants need some cotton for shipping post-holidays.”

Cotton futures for March delivery rose 2.8 cents, or 6.4 percent, to 46.55 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 46.63 cents, the highest for a most- active contract since Nov. 4.

U.S. equities gained for a fourth straight session. Commodities including crude oil and corn increased after China slashed interest rates to bolster its economy. The dollar fell to a three-week low yesterday against a basket of six major currencies and was down 2.8 percent this week.

“The rally in stocks, crude and corn and weakness in the dollar, if only in the short term, will be of a huge help to cotton and could go a long way toward cementing a seasonal low,” Sharon Johnson, an analyst for First Capitol Group in Atlanta, said in a report on Nov. 24.

The March cotton contract may reach 47 cents to 49 cents, Varner said. A “mini-rally” to that level probably would trigger sales of fiber held under a federal subsidy program, he said.

Cotton may trade from 39.4 cents to 49.8 cents for several weeks before “a buying opportunity” around Dec. 26, Varner said.

Cotton trading will be closed tomorrow for the U.S. Thanksgiving holiday.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.