Cotton prices down to a 21-month lowMonday, 14 May 2012
Mayor players within the apparel industry, including the likes of Gap, A&F, and Hollister, already predicted their expectancies for lower prices. Gap, the largest U.S. apparel chain, said in February it expected lower costs in the second half. Abercrombie & Fitch Co. told analysts on March 7 it will benefit from declining prices.
As reported by Bloomberg, industrial output slowed in China and shrank in India, adding to concern that the global economy will weaken as the European debt crisis worsens. Rains are improving prospects for crops in Texas that were hurt by drought last year.
“If China’s slowing more than expected, then it drives the risk-off attitude in commodity markets,” said Michael Creed, an agribusiness economist at National Australia Bank Ltd. “The market is still trying to come to grips with the weakening global economy and a market that’s looking increasingly comfortable in terms of how well it’s supplied.”
The fiber has plunged 64 percent from a record in March 2011 as higher prices encouraged farmers to plant more and demand fell in China, the biggest user. The commodity was the worst performer today among the 24 raw materials tracked by the Standard & Poor’s GSCI Spot Index, which fell for an eighth straight session, the longest slide since December 2008.
Cotton futures fell on Friday, finishing near a two-year low for the second straight session as bumper supplies encouraged selling by speculators who expect prices to stay under pressure over the next several weeks, analysts said. July cotton on the ICE Futures U.S. exchange slid 2.85 cents or by nearly 3.5 percent to finish at 78.97 cents per lb, trading from 77.16 to 81.76 cents. It was the lowest close for the spot contract since July 2010, according to Thomson Reuters data.
Meanwhile. cotton imports into China may tumble 35 percent from the current season to 14 million bales, the USDA said yesterday. US production will climb to 17 million bales, topping analysts’ forecasts for a crop of 16.67 million bales, the agency’s data showed. One bale weighs 480 pounds, or 218 kilograms.
“The increase in world stockpiles was a surprise,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. “Given China’s slowing imports, the USDA report has fueled cotton’s bearish sentiment, and prices may test the 75- cent level in the short term.”