Cotton fell for the fifth time in six sessions on signs that demand is slowing after prices reached a record this month and China announced plans to curb inflation.

China, the world’s fastest-growing major economy, may impose temporary price controls to counter the quickest inflation in two years, the cabinet said today. Cotton prices in New York have surged 64 percent this year as demand in China surged, and inventories plunged in the U.S., the world’s biggest exporter.

“The Chinese market was way overdone,” said Peter Egli, the director of risk management in Chicago at Plexus Cotton Ltd., a U.K.-based merchant. Prices as much as doubled in the past year, and “at some point, the profitability for a mill stops,” he said.

Cotton for March delivery fell 5.05 cents, or 3.9 percent, to settle at $1.2415 a pound at 2:30 p.m. on ICE Futures U.S. in New York. Earlier, the fiber plunged by the exchange maximum of 6 cents. The commodity has tumbled 18 percent from the all-time high of $1.5195 on Nov. 10.

The Thomson Reuters/Jefferies CRB Index of 19 commodities tumbled 3.2 percent yesterday on mounting concern that China will take steps to cool off the economy. The gauge fell as much as 0.5 percent today.

‘Reasonable Level’

“The market just had to come back to a more reasonable level” around $1.10 for cotton, Egli said.

Chinese Premier Wen Jiabao said yesterday that the cabinet is drafting measures to counter rapid price gains. The nation may impose price limits on food and toughen punishment of those found speculating on agriculture futures, the China Securities Journal reported, citing an unidentified person.

The U.S. Department of Agriculture lowered its global output estimate on Nov. 9 to 115.25 million bales for the season ending July 31, from 116.68 million bales a month earlier, and forecast that stockpiles will decline to 42.2 million bales. That would be the smallest inventory in 15 years, according to the agency’s data.

A bale weighs about 480 pounds, or 218 kilograms.