ICE Cotton Drops after Last Week's Gains, as China Demand Slows

Cotton futures fell on signs that demand is slowing from China, the world's biggest consumer, after prices posted their biggest weekly rally in 39 years.

U.S. export sales of upland cotton to China fell to 193,179 bales in the week ended Nov. 25, down 23 percent from the average during the previous four weeks, the U.S. Department of Agriculture said on Dec 2. Total U.S. exports dropped 26 percent from the average. Futures in New York have declined 14 percent from a record on Nov. 10.

"It could be a little bit of pushback on these prices overseas," said Andy Ryan, a senior risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee. "For sure there has been some pushback" with fewer imports by China, Indonesia, Pakistan and Turkey, he said.

Cotton for March delivery fell 1.91 cent, or 1.4 percent, to settle at $1.3043 a pound at 2:56 p.m. on ICE Futures U.S. in New York. Earlier, prices declined as much as 3.3 percent.

Last week, the most-active contract jumped 18 percent, the biggest weekly gain since July 9, 1971. Cotton rose to a record $1.5195 on Nov. 10, and then plunged 12 percent over the next two days.

"The market was getting ahead of itself," Ryan said. Still, prices are up 73 percent this year and should remain "relatively strong" this week, he said.

Cotton use in China is forecast to fall to 47 million bales this year, down 6 percent from last season, the USDA said on Nov. 9. The agency will update its projections on Dec. 10. A bale weighs 480 pounds, or 218 kilograms.

U.S. inventories held in warehouses monitored by ICE have increased almost 12-fold from a 2010 low of 8,910 bales in October. As of Dec. 3, stockpiles totaled 106,606 bales, down 74 percent this year.

ICE Cotton Speculation And Hedging Report

ICE Mar11 Cotton Trend: