By Christian Berthelsen and Julie Wernau
Cotton prices fell Wednesday on fears that the economy of China,
the world's largest cotton importer, may be unraveling as a
potential bumper crop takes shape.
The $4.5 billion cotton market has survived the rout in
commodities better than most other raw materials, posting a 7% gain
this year while many others have posted double-digit declines.
Still, heavy rains followed by hot dry weather in the cotton belt
stretching from Texas to Georgia this spring and summer have the
market expecting a large, high-quality crop, and with China such a
large source of demand, the country's slowing economic growth and
rocky financial markets have raised concerns about future
sales.
Cotton prices have fallen nearly 6% in the last month amid a
selloff in Chinese stocks and a flattening economic growth rate
reported by the country. Cotton for December delivery fell 1% to
63.89 cents a pound on the ICE Futures U.S. exchange.
"There's a generally bearish picture for cotton right now," said
Chris Kramedjian, a risk management consultant at brokerage INTL
FCStone in Nashville. "Crops look pretty good and there's not
enough demand. U.S. export sales are relatively low for this time
of year."
Chinese stocks have seen waning interest from investors and
traders in recent days despite government support measures for the
market. At the same time, the nation has half the world's cotton in
stockpiles and has recently begun auctioning it into the internal
market, hurting demand for U.S. cotton.
"Ideas are that the economic problems there could hurt
additional demand growth for this year and into next year," Jack
Scoville, vice president at Price Futures Group in Chicago, said in
a note.
In the U.S., the world's largest cotton exporter, traders say
conditions for the U.S. cotton crop have been their best in recent
memory. The USDA said this week that 57% of cotton is in good or
excellent condition as of the week ended July 26 compared with 54%
at the same time last year.
India, which the USDA expects to surpass China as the world's
largest cotton producer in the year beginning Aug. 1, is
forecasting a record crop because of strong monsoon rains, Price
Futures Group said.
Mike Seery, president of Seery Futures, a brokerage in
Plainfield, Ill. said he is staying out of the cotton market. The
contract has been trading in a tight range all year because of the
strong dollar and fewer imports from China, he said.
"There's a lack of interest, and we're not going anywhere," he
said.
In other markets, coffee and sugar prices saw a boost from as
the currency of Brazil, the world's largest producer of both
commodities, posted a 1% gain against the U.S. dollar, encouraging
producers to wait for more favorable exchange rates before
selling.
Raw sugar for October rose 2.6% to 11.46 cents a pound, and
Arabica coffee for September gained 1.6% at $1.2215 a pound.
Cocoa edged higher, up 0.4% at $3,217 a ton for September, and
frozen concentrated orange juice for September slumped 0.3% to
$1.2275 a pound.
Write to Christian Berthelsen at
christian.berthelsen@wsj.com
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