Jan. 25 (Bloomberg) — Cotton futures declined from a record on concern that China, the world’s largest user, may raise borrowing costs to curb inflation.
In four months, China has increased benchmark lending and deposit rates twice, and boosted reserve requirements for banks four times. The fiber jumped to a record $1.6789 a pound today as global demand continued to outpace supplies.
“Most commodity prices were under pressure on speculation that China may take further steps to cool inflation,” said Toshimitsu Kawanabe, an analyst at Central Shoji Co., a broker in Tokyo. “Also, the market may see some position-squaring before the Chinese New Year holidays, as it went up too much in a very short period.”
Cotton for March delivery declined 0.11 cent, or 0.1 percent, to settle at $1.6183 a pound at 2:38 p.m. on ICE Futures U.S. in New York. The price has more than doubled in the past 12 months. The week-long Lunar New Year holiday starts Feb. 2.
The Thomson Reuters/Jefferies CRB Index of 19 raw materials fell slid 1.5 percent, the most since Jan. 4.
Cotton inventories monitored by ICE have tumbled 72 percent in the past year. China’s imports jumped 86 percent in 2010 after economic growth lifted demand and adverse weather hurt domestic-crop quality.
“The demand for the commodity has not diminished,” said Scott Joss, the president of ClearTrade Inc., a broker in Chicago. “Profit-taking” spurred today’s drop, he said.