Cotton Falls to Two-Week Low as India Resumes Exports
October 5, 2010 Bloomberg
Cotton futures fell to a two-week low on Monday, October 4, as India, the world’s second-largest grower, ended a six-month ban on exports by issuing permits for shipments of 1.75 million bales.
Louis Dreyfus Corp., the biggest cotton trader, was among 10 companies that won permits after the government resumed bookings October 1, the textiles ministry said. India, the second- largest exporter, halted overseas sales in April to boost domestic supply. Cotton prices had soared 28 percent over three months, touching a 15-year high, amid tight supplies.
“The pipeline shortage that existed up to now is going to get cancelled out,” said Peter Egli, the director of risk management in Chicago for Plexus Cotton Ltd., a U.K.-based merchant. “We’re going to have plenty of cotton for the time being.”
Cotton for December delivery fell 2.31 cents, or 2.4 percent, to 95.71 cents a pound at 10:10 a.m. on ICE Futures U.S. in New York, after touching 95.54 cents, the lowest price for a most-active contract since September 16. Last week, the commodity dropped 1.9 percent, the first decline in six weeks.
(Editor’s update, Monday, October 4: At the close, ICE December 2010 had rebounded to 97.31, down 19 points. December 2011 was at 83.90, down 68)
(Editor’s update, Tuesday, October 5: ICE December went over $1 today, but dropped back to close at 98.56, up 73 points.)
India still has export licenses available for 3.75 million bales for shipment beginning November 1, the textiles ministry said.
World output is forecast to increase 16 percent to 115.5 million bales this season, compared with 99.9 million the year before, the International Cotton Advisory Committee said on October 1.
“During the 2010/11 crop year, a large supply response will begin to push prices lower,” JPMorgan Chase Bank NA said in a commodities report last week. “Toward the end of 2011, prices should fall back below 75 cents a pound.”
The U.S., the largest exporter, has had a good harvest, Egli said. “The weather has been nearly perfect in most areas,” he said.
Earlier: India to Allow Cotton Exports
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