Cotton Gives Up Gains; Cocoa Wobbles


NEW YORK (TheStreet) — Cotton has plunged into the red Wednesday as worries about weak physical demand crept back.

Cotton for July delivery was losing 3.8% to $1.5151 a pound, sinking to the bottom of the morning’s biggest commodity laggards.

"Physical demand is still sporadic to weak across Asia," said INTL/FCStone Fibers and Textiles Senior Risk Management Consultant Andy Ryan.

"In China, rising yarn inventory levels, worries over further monetary tightening and new forecasts of a looser domestic balance sheet all added to the bearish sentiment in local spot and forward markets, causing both to retreat further overnight."

China’s largest textile mill lowered cotton procurement prices overnight, while inland average quotes sank 39 to 109 yuan — the lowest in months, Ryan added.

The analyst said open interest on cotton contracts on the Intercontinental Exchange stumbled to its lowest since Oct. 2009.

"New crop contracting is slow," he noted.

Cocoa futures were teetering between the red and positive territory as the markets weighed the resumption of cocoa shipments from the Ivory Coast against production concerns.

The July cocoa contract was falling 0.2% to $3,263 a metric ton after rising 0.2% in the intraday. Even as thousands of tons of cocoa begin shipping out of the world’s largest cocoa producer following the end of a violent political stand-off in the country, Reuters data indicates that the mid-crop forecast could potentially be cut by a third from 300,000 tons. This, after farmers fled fields amid the unrest and amid ongoing security concerns in the more remote cocoa-growing regions of the Ivory coast.

There had also been concerns that cocoa in storage had gone bad during the four-month standoff that ended in April, when former Ivory Coast President Laurent Gbagbo surrendered to then President-Elect Alassane Ouattara — though according to a PFG Best report, other West African nations accelerated the improvement of their cocoa production during that period and were pouring investments into development of hybrid cocoa varieties resistant to pests and disease.

Heavy cotton users such as apparel and accessories companies were trading mixed.Coach(COH_) was falling 0.3% to $58.99, Polo Ralph Lauren(RL_) was trading sideways at $127.87, V.F. Corporation(VFC_) was down 0.7% to $98.28 and The Gap(GPS_) was up 0.8% at $23.31.

Cocoa plays were trading in mixed territory. iPath Dow Jones-UBS Cocoa Subindex Total Return ETN(NIB_) was rising 0.9% to $46.51, Kraft(KFT_) was up 0.2% at $33.90 andUnilever(UL_) was down 0.6% at $32.60.