Cotton futures fell to a historic low

Cotton futures fell to a two-week low on speculation that demand will shrink because of a

faltering global economy. The fiber related futures fell for the fourth straight session as export sales tumbled from the U.S., the world’s largest shipper.

“There’s a continued lack of demand and a stronger dollar” eroding the appeal of raw materials, Andy Ryan, a senior risk-management consultant at INTL FCStone Inc. in Nashville, Tennessee, said in a telephone interview. “Mills and garment makers are running inventories down rather than buying, because they don’t want to get caught with excess inventory.”

ForEx Pros reports the International Cotton Advisory Committee issued warnings that world demand for the soft fiber is waning. The ICAC also projects prices will continue dropping in price. Thus, cotton for December delivery fell 2 percent to settle at 96.76 cents a pound at 2:46 p.m. on ICE Futures U.S. in New York. Earlier, the price touched 96.51 cents, the lowest for a most-active contract since Oct. 21. The fiber has tumbled 56 percent from a record $2.197 a pound on March 7.

Output from India, the world’s second-biggest producer, may climb to 6 million metric tons in the year ending July 31 from 5.5 million a year earlier, Terry Townsend, the executive director of the International Cotton Advisory Committee, said in Mumbai. Exports may rise to 1.4 million tons from 1.1 million tons, he said. Up to the date, China is the largest producer, and the U.S. is the leading exporter.

Fiber sales plunged 56 percent in the week ended Oct. 27 to 170,930 bales from a week earlier, the U.S. Department of Agriculture said earlier this week. The agency said on Oct. 12 that production will be 16.608 million bales in the harvest that started in August, raising the forecast for the third straight month. There was “a bit of pressure from the export numbers,” Chris Kramedjian, a senior risk-management consultant at INTL FCStone in Nashville, Tennessee, said a telephone interview. “As the new harvest comes in, we will also see more pressure. The volume is thin, but we continue to see lack of demand.”

Cotton futures for December delivery declined 0.2 percent to settle at 98.12 cents a pound at 2:38 p.m. on ICE Futures U.S. Earlier, the fiber touched 97.3 cents, the lowest for a most-active contract since Oct. 24. This week, the commodity has dropped 6 percent, heading for the biggest drop since the period ended Sept. 23.

Prices have tumbled 55 percent form a record $2.197 on March 7 as demand eased in China, the world’s biggest consumer.

Demand for the soft commodity during the 2011-2012 marketing season projects to amount to 24.6 million tons, roughly the same as the 24.7 million tons during the year prior. But consumption will not increase from the nations that compose almost 66 percent of world demand for the soft fiber - China, India and Pakistan. "The projected slowdown in global economic growth in 2011 and 2012 will affect consumption of textile products, and therefore demand for cotton fiber," said the International Cotton Advisory Committee. Despite weakening demand, production of cotton is projected to demonstrably increase in Pakistan, Australia and Turkey. But the U.S. is forecast to produce 12 percent less of the soft fiber because of the severe drought in the southwest region of the country. Texas, the top U.S. state to grow cotton, suffered from its worst drought in more than 100 years.

AGR