Word is that Chinese manufacturers are not just doing well in providing for the domestic economy, but also responding to a pick up in export orders. According to this week's purchasing manager's index, this sector of China's economy has now expanded for its fourth consecutive month. A surge in bank lending coupled with the sizeable government stimulus plan has hitherto helped replace export demand missing since the fall.

We noted some months ago in the Daily Jurojin that the prospects for cotton looked pretty dim considering the slump in textile demand. The resulting price drop would likely mean that fewer farmers would choose to plant cotton and would favor those more profitable crops of beans and corn. Of course, being the contrarians that we are here, the most likely outcome would be an ultimate shortage of cotton causing prices to rise.

As we noted in Wednesday's Daily Jurojin, some of that logic is coming good. Farmers boosted the amount of acreage given over to higher priced corn, wheat and beans, upon which news prices slumped. Meanwhile, although cotton acreage increased too, the yields from the cotton fields might not be so kind to farmers. The U.S. is the world's leading cotton exporter. In Wednesday's trade a combination of the Chinese expansion and signs of a cotton shortage (yes, a shortage!) caused the price of cotton to surge to its highest in two weeks as the futures market moved 'limit-up.'

According to the China Securities Journal domestic textile demand has been creeping higher ever since January. China is the world's biggest cotton grower and user. The surge in prices might not yet be over since June to August marks that time of year when old supplies at cotton mills are run down while new inventories are gobbled up to meet anticipated demand.

Fears by mill-owners over finding enough cotton have recently been elevated on account of the fact that exactly one-third of the 1.52 million tons of the fiber that China said it would auction in May to ease supply bottlenecks has already been sold. Until the government announces plans to ease supply further, prices may still rise.

In India, which is the world's second largest grower with a forecast for a record crop of 25 million bales, fears that the monsoon season might not improve are causing further angst over the global supply picture.

We're left wondering whether China isn't starting to use cotton in some of its spurious infrastructure projects. Did you ever hear of a cotton bridge?