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cotton gains on rising demand, declining dollar, coffee falls

jan. 11 (bloomberg) -- cotton prices climbed for the first time in three sessions on speculation that lower output in china and india may boost demand and as the dollar slid, making u.s. supplies cheaper overseas. coffee fell.

producers in india, the world’s second-biggest grower, will export less of the fiber this year than forecast after floods damaged crops in some growing areas, the cotton association of india said today. output in china’s most-productive province fell last year. the dollar sank to a three-week low against a basket of six major currencies.

“it’s kind of a combination of physical demand and a weaker dollar,” said andy ryan, a risk-management consultant at broker fcstone group inc. in nashville, tennessee. “textile mills around the world are fairly short-covered and they’re still using the price dip to buy.”

cotton futures for march delivery climbed 0.42 cent, or 0.6 percent, to 72.86 cents a pound at 9:47 a.m. on ice futures u.s. in new york. cotton fell 4.2 percent last week, the biggest such drop for a most-active contract since late july, after gaining 54 percent in 2009, the most since 1973.

cotton output from xinjiang province, china’s most- productive for the fiber, fell to 2.5 million metric tons last year, the china cotton association said. china’s total cotton output was forecast to drop 11 percent to 6.7 million tons in 2009, as farmers planted less, the association has said. this year’s crop is projected to be about the same as in 2009.

in another ice market, arabica-coffee futures for march delivery fell 0.4 cent, or 0.3 percent, to $1.4495 a pound, halting a three-session rally that pushed prices to a 6.9 percent gain last week, the most since september.

the most-active contract rose 21 percent in 2009 as adverse weather damaged crops in colombia and brazil, the world’s biggest producer of the beans.

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