ICE cotton dropped more than 2 percent in heavy volume on Tuesday, to the lowest level since September 2009 on pressure from a strong U.S. dollar, a slowing Chinese economy and weak oil prices.
The most-active front-month March cotton contract on ICE Futures U.S. fell 1.44 cents, or 2.4 percent, to settle at 57.79 cents a lb, just a shade above the session low of 57.77 cents, the lowest level for the spot contract since September 2009.
Total volume exceeded 35,000 lots, nearly double the 250-day average, preliminary Thomson Reuters data showed.
“The strong U.S. dollar and the slowing Chinese economy were a drag on today’s market. And the break lower in crude oil prices did not help,” said Keith Brown, proprietor and cotton trader at Keith Brown and Co in Moultrie, Georgia.
The U.S. dollar rose around 0.5 percent against a basket of major currencies as data showed Chinese economic growth slowed less than many had feared and the International Monetary Fund forecast the United States was on a faster growth trajectory than most other major economies.
Cotton futures losses accelerated around 9 a.m. EST (1400 GMT) after traders on the U.S. East Coast arrived at their desks after the market was shut for a U.S. holiday on Monday.
The move lower also coincided with losses in oil futures prices , which fell as much as 5 percent.
Crude oil is the raw material for cotton synthetics such as rayon and nylon, and lower oil prices tend to weigh on cotton futures as well.
Cotton’s sharp move comes after the spot contract had been trading within a five-cent range of 57.84-62.84 since mid-November.
“The crop is sending the signal loud and clear to the market: ‘Don’t plant me. There’s too much of me’,” Brown said, adding that cotton supply appeared to be abundant and any increase in acreage will push the market even lower.