Cotton futures plunged the most in 14 months as the dollar’s rally reduced demand for raw materials as alternative assets.
The fiber tumbled 6 cents a pound, the most allowed by ICE Futures U.S., after yesterday reaching $1.305, the highest level since the commodity started trading 140 years ago. The greenback gained for the fourth time in five sessions against a basket of major currencies. Cotton has climbed 63 percent this year as global supplies trailed demand.
“While the U.S. Dollar Index is slightly stronger, commodity markets are generally lower, with cotton leading the way,” Andy Ryan, a senior risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee, said in a report.
Cotton for December delivery fell 4.6 percent to settle at $1.2359 at 2:44 p.m. on ICE in New York, the biggest decline since Aug. 14, 2009.
Bookings for capital goods fell in September, signaling a slowdown in U.S. business investment that gives the Federal Reserve more reason to ease monetary policy next week. Cotton and industrial metals drove the Thomson Reuters/Jefferies CRB Index lower today.
As of yesterday, cotton inventories monitored by ICE rose 37 percent to 12,181 bales from 8,910 bales on Oct. 8, this year’s lowest level. Supplies have tumbled from 1.08 million bales, the 2010 high on June 2, amid surging demand from China, the world’s biggest buyer. The U.S. is the leading exporter.