Cotton futures dropped on Wednesday, giving back the previous day's gains on rising inventories as harvest ramp up in key producers. The most-active March cotton contract on ICE Futures US dropped as low as 58.91 cents a lb before finishing down 0.76 cent, or 1.3 percent, at 59.10 cents a lb.
The benchmark has ping-ponged at or just above technically oversold conditions for the past week. Its 14-day relative strength index slipped to 35.9 on Wednesday, down from 39.3 during the prior session. "We are unquestionably in a bear market. Any rallies are short-term. We can't hold any bullish price direction because crops are getting bigger around the world," said Ron Lawson, a partner at commodity investment firm Logic Advisors in California.
India's cotton trade has stalled due to waning demand from China and a 30-percent price drop this year. Benchmark futures hit a five-year low of 58.57 cents a lb last week. The country's state-run procurement agency has ramped up purchases from farmers as a result. The Cotton Corporation of India plans to buy around 7.5-10 million 170-kg bales this year, soaring from 440,000 bales in 2013/14. Some 69 percent of the crop in the United States, the world's top exporter, is harvested, according to this week's US Department of Agriculture crop report. That is slightly lower than the average of 74 percent in the prior five-year period.
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