Cotton futures fell to their lowest levels in five years on Wednesday on fears of reduced global demand in response to top consumer China's plans to set a quota on imports. The most-active December cotton contract on ICE Futures US tumbled 2.8 percent to 61.07 cents a lb early in the session, its lowest level since hitting 60.67 cents in October 2009.
Prices later rebounded slightly and were down 1.58 cents, or 2.5 percent, at 61.27 cents a lb at 10:59 a.m. EDT (1459 GMT). Beijing said earlier this week it would lower its fibre import quota to 894,000 tonnes to help spur domestic production as it winds down its massive stockpiling program.
That would significantly reduce the amount of cotton China is expected to import from the United States in the 2014/15 crop year. The announcement was a further blow to a cotton market already facing bearish fundamentals, including an anticipated increase in world production; signs of an end to a drought in Texas, the top-producing US state; a strong dollar; and weakness in other agricultural commodity markets.
"It's one of those days when you can pick your poison," said Sharon Johnson, senior cotton analyst at KCG Futures in Georgia. Traders may be exiting the market as they await news from a cotton summit conference of nine Chinese government agencies to be held on Thursday, Johnson said.