Some of the world's largest merchants of cotton are seeking support from the U.S. government to stem a wave of contract defaults that resulted from a sharp swing in the fiber's price last year.

"We are looking for some assistance from the government any way we can get it," William May, president of the American Cotton Shippers' Association, told Dow Jones Newswires on the sidelines of a cotton conference in Fort Worth, Texas Saturday. "We've got millions of dollars worth of cotton contracts that...have not been executed."

ACSA's members include Cargill Inc., Noble Group Ltd. (N21.SG), Olam International Ltd. (O32.SG), Allenberg Cotton Inc., a unit of French trade house Louis Dreyfus, and Ecom Agroindustrial Corp., among others, May said.

The total value of the defaulted cotton is still being tallied, but May said it is in the "hundreds of millions of dollars," and between 3 to 5 million bales. That figure would mean the defaulted contracts would represent 20-30% of the 15.67 million bales produced last fall by the U.S., the world's top cotton exporter.

Cotton prices hit a record $2.27 a pound last March as demand soared and supply suffered amid bad weather in some grower nations like Pakistan.

But prices tumbled when demand wilted at the high prices, falling nearly 60% by the end of 2011 from the record peak. Many mills cancelled cotton orders that had been placed at the higher prices as much as a year in advance. The price swing crushed margins at apparel companies, commodity firms and textile mills.

The Liverpool, U.K.-based International Cotton Association, which sets the rules for most of the world's cotton trade, said it received a record 242 requests for arbitration in 2011.

Cotton mills and merchants prefer ICA arbitration over courts in each country because the process is often faster, more uniform and less expensive. Between 2000 and 2010, ICA said it received an average of 45 requests per year.

But in a shift, ACSA said it will jointly seek support from the U.S. government along with the National Cotton Council, an industry group, and an association of U.S. cotton cooperatives, known as Amcot.

The effects of the defaults have been felt since they began in the second quarter of 2011 and now into 2012. "This is going to be continuing probably, until all of these high-priced contracts are taken care of," said Phil Bogel, chairman of ACSA and a cotton trader at Toyo Cotton Co. in Dallas.

The cotton groups plan to meet with members of the U.S. Agriculture Department and the Office of the United States Trade Representative to ask for "government-to-government" meetings with countries whose textile mills have defaulted on contracts, May said.

-By Leslie Josephs, Dow Jones Newswires; 347-366-1345; leslie.josephs@dowjones.com

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