BLBG: Cotton Falls by Limit for a Second Day as Record, Holidays Curb Interest
Cotton futures in New York tumbled by the daily limit for a second day as investors sold the fiber to lock in profits after prices rallied to an all-time high.
Cotton for March delivery fell 6 cents, the most allowed by ICE Futures U.S., to $1.4812 a pound before trading at $1.482 at 12:48 p.m. in Singapore. The contract reached a record $1.5912 on Dec. 21.
“At this high level, we expect demand to start to be rationed somewhat,” Wayne Gordon, a senior analyst at Rabobank Groep NV, said by phone from Sydney.
Selling ahead of the Christmas and New Year holidays also push down prices, said Jongyoun Chung, broker at Samsung Futures Inc., said by phone from Seoul.
Prices have doubled this year, heading for the biggest annual gain since 1973, on speculation that global supplies will be inadequate to meet rising demand from China, the world’s largest user.
Export sales of upland cotton by the U.S., the world’s biggest shipper, dropped 35 percent in the week ended Dec. 9 from a week earlier, Department of Agriculture data showed.
Inventories held in warehouses monitored by ICE gained 0.5 percent to 128,420 bales as of Dec. 21 from a day earlier, increasing for a fifth straight day. That was the highest level since July 15.
China Demand
Demand in China is forecast to outpace supply by 17 million bales in the year ending July 31, according to the USDA. Stockpiles in the U.S. are forecast to plunge for a third straight year to the lowest level since at least 1960, government data show.
China will expand the import channels for grains and cotton and help importers boost domestic supplies, Minister of Commerce Chen Deming said yesterday. 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.
Still, “downstream demand for cotton yarn isn’t good, with inventory piling up, and some suppliers have begun to lower prices,” Dong Shuzhi, manager of cotton at Shanghai Jinhucheng International Trade Co., said in an e-mail yesterday.
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 as much as 1.1 percent to 27,385 yuan ($4,119) and ended the morning session little changed at 27,640 yuan.
India, the world’s second-biggest producer, will review restrictions on yarn exports on Jan. 15, trade secretary Rahul Khullar told reporters in New Delhi yesterday.
“Supply side related to the stock situation is so tight that any supply disappointment such as quality issues in Australia could cause the price to leg up significantly,” Rabobank’s Gordon said.
To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
