Cotton extended a rally to the highest price in more than 15 years after China’s top planning agency said output may drop in the world’s largest user, while the U.S. government said local crop conditions deteriorated. The December-delivery contract surged as much as 2.1 percent to $1.0615 per pound on the ICE Futures U.S. in New York, before trading at $1.0595 at 12:45 p.m. in Singapore. Cotton is the best-performing member of the Standard & Poor’s GSCI Commodity Index this year, advancing 40 percent. China’s production this year may decrease “slightly” this year, the National Development and Reform Commission said yesterday. The nation’s demand beat output by 3.6 million tons in the year to Aug. 31, wider than the 2.6 million ton deficit a year earlier, the China Cotton Association said yesterday. “Declining supply and also higher demand for cotton” are driving up prices, Chung Yang Ker, an analyst at Phillip Futures Pte, said by phone from Singapore today. “That’s increasing the competition among importers.” Crop conditions in the U.S., the world’s largest exporter, have worsened, according to a USDA report yesterday. The share that’s rated good or excellent was 55 percent as of Sept. 26, down from 58 percent a week earlier, the report said. Recent rains have resulted in a deterioration of U.S. crop quality, Commonwealth Bank of Australia said in a report today. Global output in the 2010-2011 marketing year will increase to 116.97 million bales, short of demand of 119.16 million, Macquarie Group Ltd. forecast last week. A bale weighs 480 pounds or 218 kilograms. That will put the stockpiles-to-use ratio at 38 percent, the lowest in 15 years, Macquarie said. China will auction a further 400,000 tons from reserves to satisfy demand from the textile industry, the China Cotton Association said in a statement on its website today. The U.S. Department of Agriculture has forecast that stockpiles in the Asian nation may drop 15 percent to 3.485 million tons at the end of the 2010-2011 marketing year from a year ago. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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