THE LOWEST cotton stocks in three years have seen cotton futures rise sharply in recent weeks.
During last week cotton futures made sharp gains on Wednesday, breaking through new highs for the season.
Tobin Gorey, Commonwealth Bank commodity analyst said the New York December 2021 contract finished the day not far under US89 cents a bushel, a new high for the season.
Mr Gorey also said the May 2022 contract had hit season highs, both in US and Aussie dollar terms.
Expectations of lower production in parts and increased textile demand as world economies get back into gear post COVID-19 are driving the rally.
The US Department of Agriculture has world cotton stocks projected at 89.3 million bales at the end of 2021/22. Meanwhile, global production is forecast 5 per cent higher at 118.9 million bales.
This is a healthy increase but still below 2019 record levels.
The demand is set to shift from China, whose textile industry is becoming less competitive due to rising labour costs, to other nations such as Bangladesh and Vietnam.
However, while there are some concerns about production several major producers are in good condition.
Unlike in the northern US, which has been hard hit by drought, production prospects look good in the US, where the crop is centred on the south, while Brazil, another major cotton growing nation, is also in a strong position.
Further ahead, there is plenty of subsoil moisture here in Australia's major cotton producing areas and growers have already indicated the price is likely to be high enough to spark a substantial plant.
Mr Gorey said while there had been a spike in prices in the past fortnight, fundamentally there was still likely to be adequate supplies of cotton.
In our view the balance of the numbers still leaves cotton with comfortable supply," he said.
"On balance it is likely it stays that way unless southern hemisphere crops - still just a twinkle in the eye - shrink dramatically."
Meanwhile locally cotton from the Northern Territory continues to move across to Queensland ginning facilities following a successful harvest.