Cotton Futures Soar 161.3% This Year


NEW YORK (TheStreet) — Cotton futures have popped by their seven-cent limit for the third day in a row and soared over the year amid insatiable Chinese cotton demand coupled with worries about supply tightness.

Cotton for May delivery popped by the exchange limit of 7 cents, or 3.7%, to $1.9823 a pound Tuesday.

Cotton futures are up 161.3% year-to-date.

China, which had long been a net exporter of cotton, has over the year been importing the commodity at record levels, according to the U.S. Department of Agriculture.

"It’s soaring economy and global textile trade liberalization have driven its cotton imports far beyond any other market’s," the USDA says on its web site.

This insatiable demand for cotton from China occurs as the USDA predicts a gradual, long-term decline in upland cotton harvests to 10.3 million acres by 2020 from 11.3 million acres in 2011. Since 2006, the amount of farming land dedicated to cotton crops has fallen considerably compared with other crops such as corn and soybeans due to lower relative prices, according to the USDA.

In the meantime, the current supply of cotton continues to be impacted by the bad weather that had hit many top producers of cotton.

The China National Bureau of Statistics on Monday said that China’s cotton output declined by 6.3% year-over-year in 2010 to 5.97 million tons and that cotton acreage fell to 4.85 million hectares in 2010 from 4.95 million tons the year before.

Apparel companies impacted by the rise in cotton prices were largely trading lower midday Tuesday, with Nike(NKE_) falling 0.9% to $88.25 and Wal-Mart(WMT_) rising 0.8% to $52.37.

V.F. Corp(VFC_) was down 1.1% to $94.59 and Gap(GPS_) was lower by 0.7% to $22.37.J.C. Penney(JCP_) was losing 2.3% to $34.16.