Cotton slumps to 4-week low on China growth

Cotton declined to a four-week low in New York and futures in Zhengzhou fell on speculation that global demand will decline as China, the biggest importer, takes steps to slow growth and as planting expands in India.

Cotton for March delivery dropped as much as 2.7 per cent to $1.198 a pound, the lowest price since October 22, on ICE Futures US in New York and was at $1.2079 at 12:28 p.m. Tokyo time. Last week, the fiber dropped 8.2 per cent, the most since February 2009.

“Like soybeans in Chicago, cotton is very sensitive to any impact on China’s demand,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. The dollar’s weakness may limit a further drop in futures today, he said.

Cotton for May delivery slumped as much as 3.7 per cent to 26,185 yuan ($3,943) a tonne on the Zhengzhou Commodity Exchange and paused at 26,555 yuan.

On November 19, cotton in New York fell by the exchange limit of 6 cents after China ordered its banks to set aside larger reserves for the fifth time this year, draining cash from the financial system to limit inflation. The price has gained 60 per cent this year, reaching a record $1.5195 on November 10, amid surging demand from China and plunging inventories in the US, the leading exporter.

The euro gained for a fourth day as European finance ministers said the deal will create a capital fund for Ireland’s banks and may end up “restructuring” the financial industry. The currency rose as high as $1.3752 from $1.3673 in New York on November 19. A weakening dollar makes US supplies cheaper for importers holding other currencies.

Monsoons in India, the world’s second-biggest grower, prompted farmers to plant more fiber, according to the Cotton Association of India. Output in the year that started October 1 may reach 35.7 million bales, up 3.6 per cent from the September forecast, the association said on November16. Stockpiles monitored by ICE rose 10 per cent to 50,454 bales as of November 18. They have jumped five-fold from this year’s low of 8,910 bales on October 8.