Cotton Prices Drop, Erasing Earlier Gains, as Equities Decline

By Shruti Date Singh

Nov. 25 (Bloomberg) -- Cotton futures fell from the highest price in three weeks after U.S. equity indexes declined, renewing concern the slowing global economy will reduce demand for commodities.

The Dow Jones Industrial Average, which traders see as an indicator of commodity demand, fell as much as 1.9 percent today. The Reuters/Jefferies CRB Price Index dropped as much as 2.4 percent today, led by energy and cotton futures. The price of the fiber gained as much as 3.1 percent earlier and jumped more than 12 percent in the previous two sessions.

“The weakness in equities, crude down as much as it is and cotton’s inability to hold together early, along with it having been up a lot in the past three days, suggested a modest retreat,” Sharon Johnson, an analyst for First Capitol Group in Atlanta, said in an e-mail.

Cotton futures for March delivery fell 1.05 cents, or 2.3 percent, to 43.75 cents a pound on ICE Futures U.S. in New York. The price earlier climbed to 46.2 cents, the highest price for a most-active contract since Nov. 5.

Cotton has fallen 36 percent this year on concern a global recession is eroding demand for textiles and clothing.

Global cotton consumption will decline 3.3 percent in the year through July 2009 to 119.33 million bales, the U.S. Department of Agriculture said Nov. 10. A bale weighs 480 pounds, or 218 kilograms.

“There is very little happening in the physical cotton world,” Andy Ryan, a risk management consultant for FCStone in Nashville, said in an e-mail today.

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