Cotton, which surged above $2 a pound in New York for the first time, could be about to lose a large source of buying power - although even then, it is not clear that the fibre is in for a fall, yet.
Part of the reason behind the surge in the spot cotton contract to a record high 204.02 cents a pound on Thursday has been buying by smaller US mills who purchased through the so-called "on call" mechanism, Hightower Report analyst Terry Roggensack said.
Cotton bought on call, typically from larger mills, is priced later, with a deadline of the first notice day of the relevant futures contract which kicks off the expiry process.
"You have mills which bought in December, January, early February, who have been waiting for a break to fix the price. But it hasn't come," Mr Roggensack said.
"Now they are having to price at these levels. They're screwed."
'Relieve the pressure'
Mills' scramble to cover positions was part of the reason why cotton futures rose the exchange maximum for a second successive session on Thursday, Mr Roggensack said.
The Ice exchange halted trading in cotton options, after prices hit twice the maximum rise of 7.0 cents a pound allowed in the fibre's futures.
The performance took the gains in cotton futures in the last three sessions to nearly 10%, and its jump over the last year to 170%, as measured by New York's near-term contract.
And the coming of first notice day on Friday would "relieve that buying pressure" from the on-call purchasers.
US vs world prices
Nonetheless, that did not mean cotton's rally was over, he added, noting that world prices were still higher than New York futures prices.
The Cotlook A index, based on a basket of physical prices, stood up 7.0 at a record 226.50 cents a pound. On the Zhengzhou exchange in China, the top cotton consumer, importer and producer, futures rose nearly to 35,000 a tonne, equivalent to 240 cents a pound.
"As long as world values stay above US values, there will still be demand for US cotton," Mr Roggensack said.
Indeed, official data on Thursday showed US cotton exports totalling nearly 290,000 running bales, including both the current season and 2011-12, at the top end of market forecasts.
They have now reached 96.9% of the total that the US Department of Agriculture has forecast for the whole year, to July, implying that the official estimate for American inventories at the end of the season will need to be revised lower again.
At the current estimate for year-end stocks, at 1.9m bales of 480 pounds apiece, is already the lowest for at least 50 years.
Correction ahead?
However, Commerzbank analysts issued a warning that the rally was sowing the seeds for its own destruction, by prompting a surge in cotton growing and rebuilding supplies.
"Given the expected substantial expansion of acreage this year, the supply outlook should brighten significantly in the coming months," the bank said.
"This should contribute to a sharp fall in prices over the year."
US sowings are expected to rise by roughly 15%, with the China Cotton Association pegging the rise in China at 9.8%.
Brazil, where sowings in Mato Grosso state have surged by an estimated 60% to 671,100 hectares, is forecasting a 64% jump to 2.0m tonnes in domestic production.
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