ICE cotton futures slipped over 2 percent on Wednesday, to mark its biggest one-day percentage decline in three weeks, as trade tensions grew with the United States threatening 10 percent tariffs on $200 billion of imported Chinese goods.
The most active cotton contract on ICE Futures US, the second-month December contract, settled down 1.84 cent, or 2.13 percent, at 84.54 cents per lb, after rising for the past three sessions. The contract traded within a range of 84.34 and 86.3 cents a lb.
"There is an increasing concern that China will intensify tariffs against the US if the trade war escalates," said Gabriel Crivorot, an analyst at Societe Generale in New York. China accused US of bullying and warned it would hit back.
The United States is the world's biggest cotton exporter, while China is the top consumer. Meanwhile, the markets also awaited the release of US Department of Agriculture's (USDA) monthly World Agricultural Supply and Demand Estimates (WASDE) due on Thursday.
"Everyone is probably wondering if the USDA will reduce US production in tomorrow's report. It maybe too early to see a sizeable reduction but I think the expectations are that the numbers should be below 19.5 million bales," said Beau Stephenson, senior vice president at Omnicotton Inc.
Total futures market volume fell by 2,026 to 15,941 lots. Data showed total open interest gained 489 to 252,356 contracts in the previous session. Certificated cotton stocks deliverable as of July 10 totaled 32,987 480-lb bales, down from 33,604 in the previous session. FAS India forecasts marketing year 2018/19 cotton production at 28.7 million 480 lb. bales on 11.85 million hectares.