(Bloomberg) -- Cotton futures rose, heading for a fifth straight monthly gain propelled by tight supplies in top shipper U.S. and strong Chinese demand.
American sales overseas are booming. U.S. weekly export sales as of Oct. 21 are up nearly a third from last year, with bigger Chinese purchases. The only thing holding shipments back is logistical chaos, and the difficulty of moving product right now amid high freight rates between Asia and the U.S.
Cotton has been expensive, eating away at margins for apparel makers, and the export figures show the high prices are likely to continue. That could eventually filter down to consumers, and raise prices for clothing worldwide.
Demand for American product “remains very strong” and that “implies strong prices should continue,” said Jack Scoville, vice president for Price Futures Group in Chicago.
The December contract gained 1.8% to $1.1254 a pound on ICE Futures U.S., bringing October’s gain to 6.3%. The commodity surged 50% this year supported by projections for a second world deficit. Stockpiles at ICE-monitored depots are poised to drop to the lowest level in a year.
While a plentiful U.S. crop is expected, there are questions about output in Texas, the nation’s top grower, where adverse wet weather delayed crop maturation, Scoville added.
A large short position held by commercial traders has also kept prices firm, with those participants expected to cover shorts during retreats.
Consumer demand for cotton apparel is also exceeding supplies. The U.S. is importing more, yet clothing stores are experiencing record low inventories compared to sales, said Jon Devine, supply-chain economist for North Carolina-based researcher Cotton Inc.
“U.S. import demand will remain strong to keep up with consumer demand,” he said.
In other soft commodities, raw sugar and arabica coffee slid under pressure from a slumping Brazilian real that’s boosting incentives for the world’s to supplier of both products to sell commodities priced in the dollar.
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