Cotton Has Biggest Monthly Drop in 13 Years on Slowing Economy

By Shruti Date Singh

Sept. 30 (Bloomberg) -- Cotton fell, capping the biggest monthly drop in 13 years, on concern that the slowing U.S. economy may reduce demand for clothing, furniture and bedding made from the fiber.

Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said the economy contracted in the third quarter as credit-strapped consumers cut spending for the first time since 1991. In September, cotton tumbled 18 percent, the most since June 1995.

``Cotton, being an industrial commodity, has a little bit more troubled waters to get through,'' said Keith Brown, a principal of Keith Brown & Co. in Moultrie, Georgia. ``The economy slowing down may diminish demand.''

Cotton futures for December delivery declined 0.13 cent, or 0.2 percent, to 57.25 cents a pound on ICE Futures U.S. in New York. The price earlier touched 55.11 cents, the lowest for a most-active contract since June 7, 2007. In the third quarter, the fiber slumped 27 percent, the most since the three months ended March 31, 2001.

The Cotlook A Index, the average of the five cheapest prices offered from around the world, touched 67.8 cents a pound today, the lowest since Oct. 9.

``Globally, prices have been weak in anticipation of an economic slowdown,'' Mike Stevens, an analyst at Swiss Financial Services in Mandeville, Louisiana, said in an e-mail.

Yesterday, cotton prices fell 5 percent, the most since March 17, as U.S. lawmakers rejected a $700 billion proposal to rescue financial companies, sending commodities and equities plunging.

President George W. Bush and Senate leaders vowed today to revive the plan.

``There is hope that some type of support is going to come from Congress,'' Brown of Keith Brown said.

Cotton has dropped 16 percent this year.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.