By Carolyn Cui

Cotton rose sharply Wednesday, as an industry report fueled expectations of higher demand for textiles this year.

Cotton futures for March delivery soared 3.2% to settle at 74.06 cents a pound, the highest closing level since Aug. 8. Wednesday's move would also make it the largest one-day percentage increase since Sept. 1.

The sleepy cotton market got a wake-up call late Tuesday, when the International Cotton Advisory Committee unveiled its latest forecast for global cotton markets in 2016-17. Though the agency raised its estimates for global production to 22.77 million tons, or an 8% increase from a year earlier, it also continued to see demand stay robust at 24.13 million tons.

Under that assumption, the international cotton market is likely to see its second consecutive deficit and world-wide stocks to fall to 18 million tons, according to the ICAC.

Jack Scoville, a Chicago-based analyst with Price Futures Group, said this suggested the U.S. Department of Agriculture would "be forced" to increase its demand forecasts and cut ending stocks in coming reports, unless U.S. domestic crop shows an increase in January.

However, "this will be attributable solely to China," said analysts at Commerzbank.

The world's largest cotton buyer has been slashing its state reserves in recent years, while its own production has been falling.

"If China is left out of the equation, the ICAC estimates that stocks in the rest of the world will grow by 6% to 8.7 million tons," analysts wrote in a Wednesday note.

In other markets, cocoa for March delivery rose 3.3% to close at $2,237 a ton; arabica coffee for Marchwas up 3.2% to settle at $1.4180 a pound; frozen concentrated orange juice for March fell 0.3% to end at $1.9395 a pound; and March sugar continued its upward march, gaining 1.9% to end at 20.89 cents a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

January 04, 2017 14:57 ET (19:57 GMT)

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