Cotton prices reach all-time high

Cotton prices shot to an all-time high on Tuesday, fuelled by fears of a global cotton shortage.

The agricultural commodity hit $1.638 per pound - the highest in the 141 year history of the New York exchange.

The sharp rise came as stocks fell to an astonishing low, with ICE warehouse inventories housing 125,520 bales - less than 1% of the number of contracts for delivery ahead of the US harvest.

The US - the world's largest exporter of cotton - is estimated to have sold up to 90% of last year's crop and stocks, according to the American Cotton Shippers' Association.

Carsten Fritsch, analyst at Commerzbank, said: "A look at China is enough to drive prices to greater heights. High international demand - not only from China - has already absorbed stocks on a global scale and especially in the US."

The fibre has risen some 131% in the past year alone, as mill demand rebounded following the deep recession and India curbed shipments in a bid to boost its domestic textile industry.

Growing Chinese demand has only served to exacerbate the situation, with the latest customs data showing that China's imports rocketed in 2010 by 86% year-on-year to 2.84 million tonnes after the domestic crop proved disappointing.

Fritsch added: "The high price level makes it likely that the cotton acreage will be expanded significantly in the current year. According to estimates, this expansion could be about 12-15% in the US after a similar rise was registered already last year."

Washington-based intergovernmental group the ICAC will meet with diplomats and officials next month to discuss the volatility and work towards creating transparency in government policies and programmes affecting the fibre.