* Says prices could rise another 10 pct this season
* Speculators have driven cotton prices in 2013
* Price volatility expected to remain-Olam
By Emma Farge
GENEVA, March 11 Cotton prices could rise by as
much as 10 percent before the end of the season, according to a
leading commodity trader, even as the market braces for a record
surplus and merchants worry that high prices will discourage
Raw cotton fibre, the world's worst performing commodity
over the last two years, has already risen by 15 percent since
the start of 2013 as speculators have bet on strong Chinese
imports while farmers switch acreage away from cotton to
"Assuming that China does not surprise the trade or a
black-swan event occurs, prices have probably already set a low
for the season around 82 cents (per lb) CFR Far East ports and
would assume the high not to exceed $1," said Jagdish Parihar,
global head of natural fibres at Olam International in
an emailed response to Reuters questions.
The cotton season runs from Aug. 1 to end-July.
The forecast from Singapore's Olam, which has a turnover of
nearly $14 billion and is one of the world's biggest cotton
merchants, equates to between 77 cents and 95 cents per lb on
ICE Futures U.S.
The high end of the range is some 10 percent above Monday's
prices of around 86 cents.
"It must be noted, (prices) at both ends of this trading
range will cause distortion in trade flows and stock levels
around the world," Parihar added.
His bullish outlook may alarm end-users, who see little
fundamental reason for cotton's two-month rally as the global
surplus grows, a sluggish global economy stifles retail demand
for clothing and spinning mills use more lower-cost synthetic
Even so, speculators have piled back in since early January,
sending prices on their longest winning streak in two years,
betting that prices had reached a bottom after two years of
Parihar said the price volatility that has engulfed the
cotton market since 2008 was likely to remain a feature in the
"It is hard not to see cotton prices being volatile in the
coming years as it battles two outside forces affecting both
supply and demand," he said.
The main variable on the supply side is likely to be the
size of acreage dedicated to fibre. This year, U.S. farmers are
expected to plant one of their smallest cotton crops in decades
as they gravitate towards higher-priced grains.
"Swings in either direction with one of these commodities
can enlarge the cotton area or deplete it greatly," Parihar
Changes in supply are common from one year to the next as
farmers plant the most profitable crops. Output also depends on
But fluctuations have become more extreme since 2010, when
Beijing's strategic reserve launched a two-year buying spree,
distorting trade flows and supplies.
The reserve has already bought most of China's domestic
current crop, forcing mills in the world's No. 1 consumer to
import more fibre.
That means more than half of this year's record carryover
will be in the reserve's hands and therefore not available to
While that is bullish, many traders worry about the
government's intentions for its stockpile and the long-term
impact on prices from any release onto the market.