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Oct 20, 2010
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US cotton stumbles on China interest news, dollar

By
Reuters
Published
Oct 20, 2010

NEW YORK, Oct 19 (Reuters) - U.S. cotton futures slid Tuesday on investor liquidation after China unexpected upped its interest rates and helped push the U.S. dollar to a session high, analysts said.


Photo : Corbis

The U.S. cotton market, which hit its highest level since the Civil War in the 19th century last Friday, crumbled as a result of China's announcement as speculative investment funds unloaded their holdings in the market.

Cotton prices have jumped over 65 percent since July due to tight stocks, strong demand and buying by investment funds who felt the fiber was the next big thing in commodities. "It certainly was a catalyst for the sell-off," Keith Brown, president of commodity firm Keith Brown and Co. in Moultrie, Georgia, said of the move by China and the knock-on effect on the dollar.

ICE Futures U.S. key December cotton contract CTZ0 fell 2.80 cents to trade at $1.1057 per lb at 9:15 a.m. EDT (1315 GMT), near the bottom of its $1.1024 to $1.1475 band.

The announcement by Beijing came after its own cotton market had closed higher.

The Zhengshou Commodity Exchange's May cotton futures CCFK1 was last traded at 23,940 yuan per tonne, up 245 yuan from its previous close.

The Mississippi Historical Society said cotton prices traded at their highest level since the Civil War when a blockade by the federal Navy of Confederate state ports drove prices to as high as $1.89 per lb.

Fundamentally, analysts said the cotton market is still seeing strong consumer demand from China, and supply and demand have driven cotton ending stocks to their lowest level since 1995.

(Reporting by Rene Pastor; Editing by John Picinich)

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