NEW YORK (Dow Jones)--The most-actively traded cotton prices dropped
Wednesday to their lowest levels in 20 weeks as poor retail sales and economic
outlook signalled less demand for the coming harvest.
Nearby cotton for October delivery ended 0.89 cent, or 1%, at 77.25 cents a
pound on ICE Futures U.S. However, market focus has long been on the December
contract as it represents the coming 2010 U.S. cotton harvest. The contract
settled 1.30 cent, or 2%, lower at 73.35 cents a pound. It was the lowest close
for the contract since Feb. 24.
Seasonal pressure will continue to push December cotton prices toward
near-term support at 70 cents, said Luis Rangel, vice president for commodities
derivatives at ICAP Futures in Jersey City, N.J.
Signs of weak consumer demand and a shaky economic outlook signal less buying
power for consumers.
Retail sales fell 0.5% in June, the Commerce Department said Wednesday.
Federal Reserve officials also rolled back their U.S. economic outlook for the
first time in more than a year, saying a soft job market will restrain growth.
Consumers buy more textiles--the main use of cotton--when household budgets
allow. Cotton prices rebounded in late 2009 and through early 2010, and prices
are still 25% higher than they were at this time last year.
But expectations that the U.S. fall cotton harvest will rise by 50% on the
year to 18.30 million, 480-pound bales cast a shadow over prices, analysts
said. The U.S. is the world's leading cotton exporter.
Production is forecast to jump as U.S. growers planted more cotton in
response to surging prices.
ICE daily cotton stocks decreased by 7,354 500-pound bales Tuesday to total
206,851, with 5,808 decertification orders, according to exchange data.
ICE cotton open interest--the number of active positions left at the end of
the session--decreased by 2,212 positions Tuesday to total 153,514, according
to the exchange.
Volume was estimated 12,432 lots. In options, approximately 4,353 calls and
2,320 puts traded on the floor, according to exchange data.
Close Change Range
Oct 77.25 -0.89 77.08-78.44
Dec 73.35 -1.30 73.21-74.82
Mar 74.30 -1.35 74.27-75.66