Cotton futures tumbled, capping the biggest weekly loss in 20 months, as India may boost output and China moved again to cool the economy.
Monsoons prompted farmers to plant more fiber, the Cotton Association of India said this week. China ordered banks to set aside larger reserves for the second time in two weeks, draining cash from the financial system. Cotton in New York plunged the most since June 2009. Yesterday, the price jumped 4 percent.
“The market is on a teeter-totter,” said Tom Reardon, the president of Delta Brokerage in New York. Cotton is in “an area where the slightest news is throwing the market back and forth in a kind of overdone fashion,” he said.
Cotton futures for March delivery fell by the exchange limit of 6 cents, or 4.6 percent, to settle at $1.2315 a pound at 2:49 p.m. on ICE Futures U.S. in New York. This week, the fiber dropped 8.2 percent, the most since February 2009.
The December, May and July contracts also slumped 6 cents today.
Yesterday, the most-active contract surged 5 cents, the previous ICE limit. Cotton has gained 63 percent this year, reaching a record $1.5195 on Nov. 10, amid surging demand by China, the biggest consumer and grower, and plunging inventories in the U.S., the leading exporter.
Stockpiles monitored by ICE rose 10 percent to 50,454 bales yesterday. They have jumped fivefold from this year’s low of 8,910 bales on Oct. 8. The 2010 high was 1.08 million on June 2. A bale weighs 480 pounds, or 218 kilograms.
‘Normalcy’
“Maybe cotton is slowly returning to normalcy,” Rogers Varner, the president of brokerage Varner Bros. in Cleveland, Mississippi, said in a note. He said the price will extend the slump next week.
“It is hard to see how U.S. cotton futures will move much higher,” Sharon Johnson, a senior analyst at Penson Futures, said yesterday in a report. She cited “China’s macro efforts to contain cotton prices” and “a larger cotton crop in India.”
Output in India in the year that started Oct. 1 may reach 35.7 million bales, up 3.6 percent from the September forecast, the cotton association said on Nov. 16. A bale in India, the second-largest grower, weighs 375 pounds, or 170 kilograms
The nation’s textile industry will hold a nationwide strike today, the Economic Times said, citing Premal Udani, the chairman of the Apparel Export Promotion Council.
Manufacturers and exporters of textile and apparel products, with annual shipments of more than 500 billion rupees ($11.1 billion), will protest higher raw-material prices, according to the report.
