Cotton Prices Fall on Concern Recession in U.S. Will Cut Demand
Author: Shruti Date Singh Posted: 21-10-2008 Collector:chngarment
Oct. 15 (Bloomberg) -- Cotton prices tumbled to the lowest since May 2007 on concern that a recession in the U.S., the world's largest economy, will reduce demand for goods made from the fiber.
Federal Reserve Bank of San Francisco President Janet Yellen said yesterday the U.S. is in a recession. Sales at U.S. retailers dropped in September by the most in three years, the Commerce Department said today. Cotton demand is declining because retail sales are ``very weak,'' said Keith Brown, principal of Keith Brown & Co. in Moultrie, Georgia.
``Santa Clause is not coming,'' Brown said. ``It's all doom and gloom.''
Cotton futures for December delivery fell 2.63 cents, or 5.2 percent, to 47.54 cents a pound on ICE Futures U.S. in New York. Earlier, the price touched 47.4 cents, the lowest for a most-active contract since May 15, 2007. The fiber has fallen 30 percent this year.
China, the world's largest cotton importer, may buy less as textile-production growth slows, the National Development and Reform Commission has said. China's exports of clothing and apparel rose 1.8 percent in the nine months ended Sept. 30, compared with a gain of almost 23 percent a year earlier, the country's customs bureau said.
The U.S., the biggest cotton exporter, will ship 13 million bales in the year that began Aug. 1, less than the 14.5 million forecast last month and below the 13.65 million a year earlier, the U.S. Department of Agriculture said last week. The agency cited the prospect of a global economic slowdown. A bale weighs 480 pounds (218 kilograms).
Commodity Forecast
Still, some investors are betting agricultural commodities will fare better than energy or metals.
When it comes to sector positioning, we remain underweighted in the industrial metals,'' Tiberius Asset Management AG, which manages about $1 billion in commodities, said in a report.
We are currently maintaining an almost-neutral weighting in crude, but will reduce our position below benchmark levels once a rally occurs,'' Tiberius said. ``We are primarily stocking up our positions in agricultural commodities, specifically soybeans, sugar, corn, cotton and wheat.''
The Reuters/Jefferies CRB Index of 19 raw materials fell as much as 4.5 percent today to the lowest since February 2005, led by copper, nickel and silver.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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