Cotton gained the most in a year as demand rebounded after the price slump this week to a 31-month low. Orange juice also rose as commodities jumped on speculation that Europe will take steps to spur the economy.
On June 4, cotton touched the lowest price since October 2009 on concern that the faltering world economy would expand a surplus of the fiber. In the week ended May 29, hedge funds and speculators cut their net-short position, or bets on a price drop, by 27 percent, government data showed. European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens.
“There’s always short covering when there’s a big drop” in prices, Scott Joss, the president of ClearTrade Commodities Inc., a broker in Chicago, said in a telephone interview.
Cotton for December delivery soared 4.6 percent to settle at 68.36 cents a pound at 3:08 p.m. on ICE Futures U.S. in New York, the biggest increase since May 31, 2011.
Global equities rallied and the Standard & Poor’s GSCI Spot Index of 24 raw materials headed for the biggest gain in two months.
Cotton is drawing support from “the broader markets’ rally,” while a falling dollar enhanced the appeal of raw materials as alternative assets, Andy Ryan, a senior risk manager at INTL FCStone in Nashville, Tennessee, said in a telephone interview.
“Demand has picked up a little but not a lot,” Jordan Lea, the chairman of Greenville, South Carolina-based Eastern Trading Co., an exporter, said in an e-mail. “Technically, the market looks bad and it is raining in Texas,” bolstering prospects for the crop in the U.S., the world’s top shipper.
American farmers will probably increase output by 9.2 percent in the year starting Aug. 1 from a year earlier, the U.S. Department of Agriculture said last month. The agency will issue an update on June 12.
Orange-juice futures for July delivery rose 1.6 percent to $1.166 a pound in New York, the second straight increase.