ICE cotton fell on Monday in sympathy with grains markets and under pressure from concerns that global cotton supplies will continue to outpace waning demand, as top consumer China slows purchasing for its strategic stockpiles. The most-active March cotton contract on ICE Futures US edged down 0.49 cent, or 0.6 percent, to settle at 77.71 cents a lb.
The ICE December contract closed down 0.75 cent, nearly 1 percent, at 76.37 cents a lb, on liquidation ahead of Friday's first notice day for cash delivery against the contract. The Thomson Reuters/Core Commodity CRB index was down. Corn prices tumbled to a three year-low, lending pressure to cotton as it competes with grains crops for acreage.
China's purchases of domestic cotton for its strategic reserves totalled just 44 percent of targeted levels last week, with volumes dropping ahead of reserve auctions expected to start this week. Beijing's controversial government stockpiling program has driven voracious import demand and placed a floor under global cotton prices. Global inventories are expected to reach a record by the end of July, as global output again outpaces demand and fiber has faced competition from lower-priced, synthetic alternatives.
Spot prices are down 13 percent from the beginning of October, and nearly 19 percent from August highs near 94 cents. ICE stocks climbed to over 202,000 bales last week and the most since July, exchange data compiled by Reuters showed.
"Generally, the outside markets are weak, and cotton is trending lower," said Jobe Moss, a broker with MCM Inc in Lubbock, Texas. "When you put everything in perspective, we had a strong export figure last week, but the question: Is this a flash in the pan? The market wants to see it proved." US export sales jumped as the recent price slump has reignited demand. Physical and technical support near the 75-cent level underpinned the market, as prices teetered on the edge of bear territory.
In Brazil, the agriculture ministry declared a state of emergency in the country's major cotton producing states of Mato Grosso and Bahia as caterpillars threaten crops. The US Agriculture Department earlier this month raised its expectations for Brazil's output to 7.4 million 480-lb bales, up from a previous forecast of 7.2 million bales. A US weekly crop report released after Monday's close showed the harvest in the world's top exporter continued to gather pace, though it remained behind previous years.
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