Cotton Drops on Signs Rally Went Too Far
August 18, 2010 By Elizabeth Campbell
Bloomberg Businessweek
Cotton futures fell on speculation that last week’s rally to a four-month high had gone too far, with U.S. farmers expected to begin harvesting their biggest crop in three years. Orange-juice futures declined.
The price of cotton has rallied 15 percent since July 20, touching the highest level since April on Aug. 13. Production in the U.S., the largest exporter, will jump 52 percent to 18.5 million bales, the biggest crop since the season ended July 2008, according to the U.S. Department of Agriculture.
“Cotton came a long way in very rapid intervals,” said Rogers Varner, the president of brokerage Varner Bros. in Cleveland, Mississippi. “The harvest is about to begin in the lower latitudes of the southern states.”
Cotton for December delivery dropped 0.16 cent, or 0.2 percent, to settle at 84.02 cents a pound at 2:30 p.m. on ICE Futures U.S. in New York, the first decline in three sessions. Last week, prices climbed 4.9 percent, the fourth straight gain.
A lot of the cotton in the early harvest is “already spoken for,” Varner said. U.S. export sales of Upland cotton totaled 5.41 million running bales for the year that began Aug. 1, according to USDA data as of Aug. 5. A running bale weighs 500 pounds, or 227 kilograms.
Earlier, futures climbed as much as 0.7 percent on signs of limited global supplies as Pakistan reported crop losses from the deadliest flooding in the country’s history.
The floods destroyed 1.1 million acres of cotton and rice, causing losses of 280 billion rupees ($5.98 billion), Farm Minister Nazar Muhammed Gondal said today in a telephone interview from Islamabad. Pakistan is the fourth-biggest cotton producer.
“The reports out of Pakistan are an ongoing concern,” said Andy Ryan, a senior risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee.
(Story found in original format here.)
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