Cotton ‘Too Cheap’ to Draw Significant New Acreage

(Bloomberg) -- The global cotton market will remain tight through the next crop season as futures prices are too low to induce farmers to significantly boost the area that they devote to the fiber, Olam International Ltd. said.

The December contract needs to rise to about 85 cents a pound to attract the planting needed to produce a surplus big enough to replenish stockpiles, said Cliff White, senior vice president at Olam, one the world’s three biggest cotton traders. December cotton ended at 75.07 cents in New York yesterday.

The global cotton market has been in deficit since 2006, according to the Department of Agriculture in the United States, the world’s biggest exporter. Prices may remain “high” from May to June as the next U.S. crop is planted, said White.

“The December price is too cheap for the new crop to attract significant acreage,” he said in a phone interview from Richardson, Texas. White is also the president of the International Cotton Association, which groups more than 300 producers, buyers and traders.

The most-actively traded contract on ICE Futures U.S. has surged 90 percent over the past year as the global economy moved out of recession, and the May contract traded today at 81.45 cents a pound. Futures touched a two-year high of 84.6 cents on March 1 on growing demand from mills.