ICE cotton futures fell over 1% on Friday on fears of escalation in a trade spat between the United States and China after US President Donald Trump threatened to counter a new round of retaliatory tariffs from Beijing. Cotton contracts for December fell 0.71 cent, or 1.20 %, at 58.23 cents per lb at 01:43 pm EDT (1743 GMT). Prices are down more than 3% so far this week.
"The market was recovering a bit and then China came out with announcement of new tariffs. That kicked (the market) and everything started falling apart," said Jim Nunn, owner of Tennessee cotton brokerage Nunn Cotton. "The market is going to have a huge carry over (of cotton stocks) and that's been weighing. Prices keeps failing at 60 cents. If we can't go through, it is going to the down side. And then we have the news on the tariffs."
Traders were hoping for a pickup in sales after a strong sales report last week. However, the weekly US Department of Agriculture export sales report showed sales nearly halved from last week. The report showed net sales of 164,000 running bales (RB) for the 2019-2020 marketing year, primarily for Indonesia and Vietnam. Cotton has fallen 21% so far this year as a trade war has strained ties between the United States and China, hurting demand for the natural fibre. China is the world's top consumer of cotton, while the United States is one of the biggest producers.
"There have been persistent rumours of impending large cancellations by China, which could total a million bales or more," British merchant Plexus Cotton said in a research note. "Given the significant price differential on some of the earlier sales it is plausible that not all of the 1.76 million running bales that are currently open with China are going to be honoured. This seems to have weighed on traders' minds this week." Total futures market volume rose by 511 to 17,439 lots. Data showed total open interest gained 528 to 216,481 contracts in the previous session.