Cotton Declines to 21-Month Low on Increasing Global Stockpiles


Cotton tumbled to a 21-month low, trimming costs for clothing retailers including Gap (GPS)Inc., after a U.S. government report showed global inventories will gain and data from Asia showed a further slowdown in industrial output.

Cotton for July delivery declined as much as 5.7 percent to 77.16 cents a pound, the lowest price for a most-active contract since July 2010, on ICE Futures U.S. in New York, and traded at 78.55 cents at 9:18 a.m. in London. Futures declined for an eighth day, the longest losing streak since June 4, 2010.

The fiber has lost 64 percent since reaching a record in March 2011 as higher prices spurred farmers to boost plantings and demand in China fell. World stockpiles will climb 10 percent to 73.75 million bales in the season from Aug. 1, the U.S. Department of Agriculture said yesterday. Industrial output slowed in China and shrank in India, adding to concerns global growth is slowing as European leaders tackle the debt crisis.

“If China’s slowing more than expected then it drives the risk-off attitude in commodity markets,” said Michael Creed, an agribusiness economist at National Australia Bank Ltd. “The market is still trying to come to grips with the weakening global economy and a market that’s looking increasingly comfortable in terms of how well it’s supplied.”

JPMorgan’s Loss

Commodities as tracked by the Standard & Poor’s GSCI Spot Index wiped out gains for the year today as copper, crude oil and grains fell after the Asian data and JPMorgan Chase & Co. disclosed a $2 billion trading loss.

China’s industrial output rose 9.3 percent in April from a year earlier, according to data today, compared with the 12.2 percent median estimate in a Bloomberg survey of 32 economists and 11.9 percent in March. Production in India unexpectedly contracted 3.5 percent in March.

Cotton imports into China may tumble 35 percent from the current season to 14 million bales, the USDA said. U.S. production will climb to 17 million bales, topping analysts’ forecasts for a crop of 16.67 million bales, the agency’s data showed. One bale weighs 480 pounds, or 218 kilograms.

“The increase in world stockpiles was a surprise,” said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. “Given China’s slowing imports, the USDA report has fueled cotton’s bearish sentiment and prices may test the 75- cent level in the short term.”

Gap, the largest U.S. apparel chain, said in February it expected lower costs in the second half.Abercrombie & Fitch (ANF), the operator of its namesake and Hollister teen-clothing stores, told analysts on March 7 it will benefit from declining prices.