Cotton Extends Longest Slump Since July as Economic Outlook Dims


Sept. 21 (Bloomberg) — Cotton futures fell for the fifth straight session, marking the longest slump since July, on signs that slowing economic growth will curb demand for supplies from the U.S., the world’s largest exporter.

The debt crisis in Europe and political squabbling over how to prevent contagion are raising concern that the risk of defaults by governments is increasing, the International Monetary Fund said today. The MSCI World Index of equities fell as much as 2.5 percent. Cotton futures have plunged 53 percent from a record in March.

“A lot of people are worried about demand destruction” as the economic crisis worsens in Europe, Fain Shaffer, the president of Infinity Trading Corp., in Medford, Oregon, said in a telephone interview. “There won’t be as much need for as much cotton.”

Cotton for December delivery slumped 2.58 cents, or 2.4 percent, to close at $1.0283 a pound on ICE Futures U.S. in New York. The decline matched the longest losing streak since July 6 and left the commodity down 29 percent this year. Prices reached a record $2.197 on March 7.

The dollar rose as much as 1 percent against a basket of six major currencies, diminishing the appeal of U.S. commodities.

“Cotton elsewhere in the world is cheaper, and there are bountiful crops elsewhere,” Mike Stevens, an independent trader in Mandeville, Louisiana, said in a telephone interview. “The U.S. has been shoved into the world of residual supply.”

China, the largest importer, has reduced purchases by 13 percent in the first eight months of the year, compared with the same period in 2010, government data show.

Australia, the fourth-largest exporter last year, will harvest a record 1.14 million metric tons this year, up 27 percent, the Australian Bureau of Agricultural Resource Economics and Sciences said in a Sept. 13 report.

Production in Brazil is expected to climb to 8.75 million bales in the 2011-2012 season, a unit of the U.S. Department of Agriculture said in a report on Sept. 14.