BLBG: Cotton Futures Tumble by Daily Limit as Rally to Record May Prompt Sales
Cotton futures in New York tumbled by the daily limit as a recent rally to a record may dampen demand for the fiber and encourage farmers to sell.
Cotton for March delivery fell 5 cents to $1.5412 a pound on ICE Futures U.S. in New York at 3:34 p.m. Tokyo time. The contract reached a record $1.5912 yesterday. Prices have doubled this year, heading for the biggest annual gain since 1973, on speculation that global supplies will fail to keep pace with rising demand from China, the world’s largest user.
Prices had surged as demand in China is forecast to outpace supply by 17 million bales in the year ending July 31, according to the U.S. Department of Agriculture. Stockpiles in the U.S., the biggest exporter, are forecast to plunge for a third straight year to the lowest level since at least 1960, government data show.
“The market has been extremely overbought and there might be some investors unwinding their bets on a price rise before the Christmas holiday,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. “Fundamentally, supply is still tight and India’s exports are not enough to ease the shortfall.”
India will allow the export of 2.5 million bales, Anand Sharma, minister for commerce and industry, said yesterday. The government is issuing fresh export permits after traders failed to ship the full 5.5 million bales allowed under contracts handed out in October. A bale in India weighs about 374 pounds.
Inventories held in warehouses monitored by ICE rose 6.1 percent to 127,759 bales as of Dec. 20 from a day earlier, increasing for a fourth straight day. That was the highest level since July 15.
China Imports
China will expand the import channels for grains and cotton and help importers boost domestic supplies, Minister of Commerce Chen Deming said today. The country faces difficulty in boosting grain and cotton supplies in the short term and high global commodity prices will limit imports and the country’s ability to curb domestic prices, China National Radio reported, citing Chen.
Cotton imports by China were 126,125 metric tons last month, according to an e-mailed statement from the customs agency on Dec. 21. That compared with 154,547 tons a year earlier and 96,096 tons a month ago.
September-delivery cotton on the Zhengzhou Commodity Exchange dropped 4.6 percent to close at 27,675 yuan ($4,158).
In New South Wales, Australia, cotton planting is estimated at 346,250 hectares (855,600 acres), up 14 percent from the October estimate, while excluding the effect of flooding in the Macquarie valley, Orange-based Industry & Investment NSW said in a report on its website today.
To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
