* Losses limited by soaring grains market
NEW YORK, Aug 10 (Reuters) – Cotton sank almost 4 percent on Friday, its largest daily fall in two months, after the U.S. government raised its estimate for global cotton stockpiles to fresh record highs, reinforcing fears about a growing surplus and weakening demand.
The benchmark December cotton contract on ICE Futures U.S. fell 3.9 percent to settle at 73.02 cents per lb, close to its intraday low.
While the market retraced half the ground gained in the seven days leading up to the report, prices were cushioned by a renewed surge in grains prices, traders said.
Corn hit new all-time highs on Friday after the USDA slashed its U.S. crop forecast as the worst drought in almost half a century grips the U.S. corn belt.
The new ending stock estimate of 74.67 million 480-lb bales would hit a new record, beating the previous high set last season by 10 percent, according to U.S. Department of Agriculture USDA records which began in 1960.
“You can’t look at these numbers and think anything other than it’s bearish,” said a source a textile mill, warning that prices could fall back to as low as 60 cents a pound in the coming weeks.
Analysts, traders and academics polled by Reuters ahead of the report had, on average, predicted the authorities would trim their ending stock estimate to around 70 million bales due to expectations of lower crops from India, the world’s second-largest producer.
Estimates for India were cut alongside Brazil, where farmers are expected to switch out of fibers and into soybeans due to the soaring prices during their planting season later this year.
But those were more than offset by forecasts of plentiful crops in China and the United States, the world’s No. 1 and 3 producers.
The U.S. data was particularly bearish with the authorities raising its stocks-to-use ratio for 2012/13 to 35.5 percent from 31 percent due to a lower abandonment rate of 14.5 percent.
That pushed the production estimate up more than 800,000 bales to 17.65 million bales.
The new forecast based on its first field surveys for this season was in marked contrast to the 16.6 million bales projected on average in a Reuters poll ahead of the report.
“Today’s report continued to reflect the theme of weakening global demand, with domestic use estimates cut again in China and Pakistan,” said Morgan Stanley analysts.
(Reporting by Josephine Mason; Editing by Leslie Gevirtz)