NY cotton jumps the daily limit on Indian export ban

* US not in position to replace India

* Slowing Chinese economy may cut cotton imports

    By Rene Pastor  

    NEW YORK, March 5 (Reuters) - Cotton futures soared the daily limit on Monday on unexpected news that India has banned cotton exports and Chinese textile mills may have to turn to U.S. supplies to meet the deficit, analysts said.  

    The key May cotton contract on ICE Futures U.S. shot up the 4.00 cent daily limit to trade at 92.23 cents per lb at 9:30 a.m. EST (1430 GMT), up 4.5 percent on the day.    

    "That's because of India putting on this unexpected announcement in banning exports," Keith Brown, president of commodity firm Keith Brown and Co. In Moultrie, Georgia.

    India banned cotton exports with immediate effect to ensure ample supplies for the domestic industry which accounts for some 4 percent of GDP and employs large amounts of people in the South Asian nation.

    Most of India's exports go to China, the world's biggest producer and consumer of cotton for its huge textile and apparel industry.       

    India's is the world's No. 2 producer of cotton, but exports a significant amount of cotton, especially to China, where it enjoys a competitive advantage in shorter shipping routes.  

    India is the top rival of the United States, the world's No. 3 producer and top exporter of the fiber. 

    The surge in U.S. cotton futures was fueled in part by market belief that available supplies in the United States are now limited.  

    "The United States is running out of the current available crop. We have fewer than 800,000 bales left for sale excluding beginning stocks at this point," a weekly market summary by VIP Commodities said, adding "the U.S. is almost out of cotton."     

    But analysts said the Indian ban may only provide a temporary boost to cotton prices because demand from China's mills have slowed down due to the economic crisis in Europe and Chinese stocks are plentiful.      

    Brown also pointed to news that China has cut its 2012 GDP target to 7.5 percent, the lowest in 20 years.  

    "It is obviously a friendly piece of news but it (may not) last," he said.   

    The U.S. Agriculture Department's monthly supply/demand report pegged China's 2011/12 cotton imports at 17 million (480-lb) bales. China has been a heavy buyer of U.S. cotton in the weekly USDA export sales data, but the amount slowed down in the last report.

    Brown said that is the reason why the rally is largely confined to the old-crop May and July cotton contracts because large supplies are expected when the new crop is priced against the December contract.