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Ice cotton gains on expectations of higher china imports

Ice cotton gains on expectations of higher china imports Source:
Date: 16-09-2013
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Cotton futures rose the most in over three weeks on Tuesday as China began stockpiling this week and on expectations Thursday's monthly US government forecast would show continued strong demand in the world's top consumer. The most-active December cotton contract on ICE Futures US closed up 0.97 cent, or 1.2 percent, at 84.47 cents a lb.

It was second-month contract's biggest daily gain since mid-August, when speculators began exiting the market in droves and sent prices tumbling from a five-month peak. Prices have clawed back some of the losses over the last three sessions, as China this week began stockpiling cotton from the 2013 crop and dealers positioned themselves ahead of the monthly US Department of Agriculture (USDA) supply and demand report. "People are feeding off the ideas that China will continue to build their reserve at $1.50 a lb," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.

Beijing launched the program in 2011, paying above global prices to support farmers and spurring voracious demand for lower-priced foreign cotton. The stockpiling was expected after China announced plans to continue the program, but it eased traders' concerns that the country would overhaul it this year as textile mills struggle and the country's share of world inventories balloons. China is preparing to scrap the program, likely from the start of the 2014/15 crop year.

Some dealers expected that the USDA may increase its expectations for China's consumption after a US government attache raised its import forecast in a report last week. Expectations of a bumper crop in India, the world's top consumer, have eased some concerns over a reduced production outlook for top producer China and the United States, the world's biggest exporter. Last month, the US government lowered expectations for US and global output more than expected, fuelling a speculator-driven rally that lifted fibre to a peak of 93.72 cents per lb. Prices are down nearly 10 percent from that high set in mid-August. The non-commercial dealers have nearly halved their net long position in cotton futures and options in the past two reporting weeks, US government data showed on Friday.
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