Cotton Futures Tumble as China to Curb Speculation, Inflation

Nov. 17 (Bloomberg) -- Cotton extended losses in New York and futures in Zhengzhou tumbled by the daily limit on concern that China, the biggest consumer, will curb speculation and take additional measures to limit inflation, cutting demand.

Cotton for March delivery fell as much as 3.2 percent to $1.2511 a pound, the lowest level since Oct. 29, on ICE Futures U.S. in New York and traded at $1.2791 by 2:37 p.m. Tokyo time. The daily trading limit for cotton futures increased to 6 cents a pound from 5 cents yesterday, according to the exchange.

A Chinese consumer confidence index fell for the first time in six quarters because of concerns over inflation. The measure dropped to 104 in the third quarter from 109 in the previous three months, according to a statement released by Nielsen Co. and the Chinese statistics bureau’s Economic Monitoring and Analysis Center in Beijing today.

“China’s move dragged cotton and other commodities lower,” Toshimitsu Kawanabe, an analyst at Tokyo-based commodity broker Central Shoji Co., said today. “I don’t think the impact will last longer” as U.S. quantitative easing may spur investment demand amid tight supply, he said.

Cotton for May delivery slumped as much as 5 percent to 27,090 yuan ($4,075) a ton on the Zhengzhou Commodity Exchange before trading at 27,355 yuan by 1:38 p.m. local time.

Chinese Premier Wen Jiabao said yesterday that the cabinet is drafting measures to counter rapid price gains. The nation may impose price limits on food and toughen punishment of those found speculating on agriculture futures, the China Securities Journal reported, citing an unidentified person.

The Thomson Reuters/Jefferies CRB Index of 19 commodities tumbled 3.2 percent yesterday on mounting concern that China will move to cool economic growth.

Tight Supply

Global cotton supply remains “tight,” Wayne Gordon, an agricultural commodities analyst at Rabobank Groep NV in Sydney, said in an interview with Bloomberg Television. “The stocks-to- use ratio in cotton is the lowest level since 1994.”

The U.S. Department of Agriculture lowered its global output estimate on Nov. 19 to 115.25 million bales, from 116.68 million bales a month earlier, and forecast that stockpiles will decline to 42.2 million bales. That would be the lowest global stockpile in 15 years, according to the agency’s data. A bale weighs about 480 pounds.

(Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1yd1kWQvwUE)