Cotton declined to a four-week low as China, the world’s biggest consumer, took steps to curb speculative trading and cool the economy, eroding demand from textile producers.

Last week, China increased bank-reserve requirements following the fastest rise in consumer prices in two years, and Premier Wen Jiabao held a Cabinet meeting to call for a crackdown on speculation in agricultural goods, saying price controls may be needed on “daily necessities.” Cotton dropped 13 percent in the previous two weeks.

“When the market’s falling like this, the mills don’t want to jump in and catch the falling knife,” said Andy Ryan, a senior risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee. In China, “mills have gotten very confused and nervous,” he said.

Cotton for March delivery fell 5.36 cents, or 4.4 percent, to settle at $1.1779 a pound at 2:45 p.m. on ICE Futures U.S. in New York. Earlier, the price tumbled by the exchange limit of 6 cents to $1.1715, the lowest since Oct. 22.

Cotton has gained 56 percent this year, reaching a record $1.5195 on Nov. 10, amid surging demand from China and plunging inventories in the U.S., the leading exporter.

“The market got way ahead of itself, way ahead of the fundamentals,” said Keith Brown, the president of Keith Brown & Co., a brokerage in Moultrie, Georgia.

Cash prices in Beijing dropped to 28,520 yuan a metric ton today, down 9.5 percent from 31,526 yuan on Nov. 11, the highest since at least 2003, according to data from Shanghai JC Intelligence Co.

Regional authorities in China must report before Nov. 30 on their progress in stabilizing prices of essential goods including food, the State Council said on Nov. 20.

China’s new-crop harvest was 68 percent completed at the end of October, the China Cotton Association said today, citing a National Development and Reform Commission report. A year earlier, 82 percent was gathered.