Cotton futures dropped to the lowest levels since September 2009 on Thursday, tumbling through the key psychological 60-cent level as it extended a rout on a bearish technical outlook and weak demand as harvesting ramps up in key producers. The most-active December cotton contract on ICE Futures US dropped as low as 58.73 cents a lb and was down 1.59 cents, or 2.6 percent, at 58.75 cents by 12:48 pm EDT (1748 GMT).
The second-month was headed for a weekly loss of more than 6 percent, which would be its largest such rout since May. Sell-stops exaggerated losses as the benchmark contract fell through the previous contract low for March and pressure from the rolling of closely watched commodities index funds turned into liquidation. "The cotton world is getting the message that this is a bear market," said Jobe Moss, a broker with MCM Inc in Lubbock, Texas. "We've blown through the previous lows. If we close down here, watch out."
The world is expected to be awash in excess inventories as farmers in the United States, the world's largest exporter, and other key producing nations harvest big crops. Demand has slowed as mills eye tumbling prices and flee to the sidelines, expecting that prices will fall further as harvests progress. That slowdown has been particularly notable in top consumer China, where the government is overhauling its agricultural support program.
The worries over the lack of demand came into sharper focus this week as traders and millers gathered in Arizona for an industry conference where business was said to be lacklustre. "Typically this time of year is really busy," said Kelli Merritt, a cotton farmer and independent broker in West Texas. "There's this fear of the unknown out there."
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