China’s high demand for cotton is sparking the fiber’s near-record bull bet for hedge funds.
Chinese buyers have committed to purchasing almost five times more American cotton than at this time last year, the U.S. government said in a report this month. The price of cotton is heading for its biggest monthly advance since July. Hedge funds are positioned for more gains, holding the second-most bullish wager ever.
American growers, the world’s top exporters, are expected this season to ship the most cotton since 2013, data from the U.S. Department of Agriculture show. Sales growth is also being driven by purchases in Indonesia and Vietnam.
The net-long position in cotton rose 3.2 percent to 87,341 futures and options in the week ended Jan. 24, data published by the U.S. Commodity Futures Trading Commission three days later show. That was just a little low of an all-time high of 90,215 contracts set on Jan. 10, according to the figures, which go back to 2006.
Cotton traded on ICE Futures U.S. in New York climbed 2.5 percent last week. Prices were a little changed at 74.91 cents a pound on Monday and are up 6 percent this month. Futures touched 75.37 cents on Jan. 5, the highest since August.
Cotlook Ltd., a Birkenhead, England-based research company said last week that consumption will probably outstrip production by 1.24 million metric tons this year. That can help to erode global stockpiles, which the USDA estimates at 90.6 million bales, each weighing 480 pounds (218 kilograms).
Demand is also approaching at a faster pace this season, which ends July 31. U.S. exporters have already sold 38 percent of expected shipments, topping the five-year average of 32 percent, USDA figures show.
The price gains will likely urge U.S. farmers to increase plantings, especially with futures for competing crops relatively weak. American sowings may rise 7.6 percent this year to about 10.84 million acres, a Bloomberg survey showed. The USDA will release its first estimate during its annual Agricultural Outlook Forum on Feb. 23-24.