Flooding in Pakistan, heavy rains in China and a possible export embargo from India all contributed to the spike in cotton prices Tuesday.
On the IntercontinentalExchange, cotton futures for October delivery jumped 1.5 percent to $1.019 per pound, while December contracts gained 2.137 percent to $1.0154 per pound.
Before trading began in New York this morning, the Financial Times reported, it was preceded by heavy buying in China on the Zhengzhou commodity exchange, where local commodity futures brokers were reportedly stocking up.
"From the buying pattern we have seen out of China, it would appear that collectively, they may not have seen this rally coming," Ron Lawson, an analyst from the commodities research firm Logic Advisors, told the FT.
Cotton has only been above $1 per pound in nominal terms twice since the end of the American Civil War – and if global supply tightness continues, it could continue to set fresh highs. Rising cotton futures would mean increased production costs for clothing manufacturers, who would be forced to choose between raising prices or cutting into other costs, like labor and quality control.
Either way, the recent surge in cotton futures is good for farmers – unless they are in India and thus banned from international markets – and bad for the garment industry.
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