Cotton Falls on Signs U.S. Exports Will Fall Short of Forecast
Cotton fell the most in a week on
speculation that U.S. exports may rise less than the government
forecast, leaving more unsold supplies.
The U.S. has exported about 6.1 million bales since Aug. 1,
which means almost 10 million must be shipped in the next six
months to meet the U.S. Department of Agricultures forecast of
16 million bales, said Carl Anderson, professor emeritus at the
department of agriculture at Texas A%26amp;M University in College
Station. The U.S. is the worlds largest cotton exporter.
“We are seriously behind, said Jim Lambert, senior vice
president for Globecot LLC in Nashville, Tennessee. “I have a
feeling they are going to revise it lower to about 15.8
million bales for the current marketing year, he said.
Cotton futures for March delivery fell 0.77 cent, or 1.1
percent, to 67.79 cents a pound on ICE Futures U.S., formerly
known as the New York Board of Trade, the biggest decline since
Jan. 23. The price fell 0.3 percent for the month.
While the U.S. has shipped an average of 235,000 bales a
week during the current marketing year, exports would have to
reach 380,000 bales a week through the end of July to make the
forecast, Anderson said. Upland cotton export sales totaled
291,400 bales for the week ended Jan. 24, double the total from
a week earlier, the USDA said today.
The U.S. will hold 7.9 million bales of unsold cotton by
July 31, the department said Jan. 11. The USDA will update its
world cotton supply-and-demand estimates Feb. 8.
“They will see the reflection in the balance sheet because
there is more cotton, Lambert said.
Rolling Contracts
Also weighing on prices is concern that speculators, after
building up net-long positions in cotton as prices jumped during
the past year, will soon sell March futures before the start of
deliveries on the contract Feb. 25, analysts said. Some
speculators may not “roll into the May contract, reducing
their holdings, Lambert said.
If demand weakens, “funds with long positions are getting
out of the market, Lambert said. A long position is a bet
prices will rise.
Cotton still is up 26 percent in the past year and reached
72.96 cents on Jan. 14, the highest for a most-active contract
since March 1, 2004, on speculation the fiber may lose acreage
for a second-straight year to crops such as corn, soybeans and
wheat and on strong buying from index and hedge funds.
U.S. cotton acreage dropped 29 percent to 10.8 million
acres in 2007 and analysts expect another decline this year.
Long Positions
Hedge-fund managers and other large speculators increased
their net-long position in New York cotton by 1 percent to
73,521 contracts in the week ended Jan. 22, according to
government data. The holding was the largest since at least
1994, the most recent data available to Bloomberg. Hedge funds
held a net-short position this time last year.
During the week ending Jan. 22, index funds increased long
positions by 2.4 percent to 111,143 contracts.
The drop in price to 67 cents or below may uncover demand
from overseas textile mills, said Peter Egli, director of risk
management for U.K.-based Plexus Cotton.
“You see a two- to three-cent drop, and the Chinese may
step in, Lambert said. “They are looking at buying
opportunities.
China is the largest producer and consumer of cotton.
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