Cotton Futures Edge Down on Export Worries

By Carolyn Cui Features Dow Jones Newswires

Cotton futures edged down Tuesday, as some traders began to worry whether export sales of U.S.-grown cotton could continue to be strong.

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Cotton for July delivery fell 0.6% to 78.34 cents a pound on the ICE Futures U.S. exchange. Late last week, the most active contract for cotton hit the highest price in three years.

"The market has been demand driven for a very long time. We'll see whether that continues or whether that begins to wind down as we approach the end of the season," said Herman S. Kohlmeyer, Jr., managing director at Michael J. Nugent & Company Inc.

In March, China's cotton imports fell 12.4% from a month earlier to 121,000 metric tons, although imports were 78.4% higher during the first quarter.

This year, cotton futures have been rising on the back of robust overseas demand for U.S. cotton. Week by week, net export sales surprised to the upside, a frustration for some market participants who were waiting for prices to drop.

As of last week, total export sales already reached 98.5% of the USDA's target for this marketing year.

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Some analysts began to worry whether the strength in cotton prices were unsustainable amid significantly higher global inventories. Prices have reached to the levels which are high enough to entice acreage expansion across the world.

Cotton Inc. wrote in its March economic newsletter that while bales of cotton are dwindling, world stocks at the end of this year are still expected to be 50% higher than they were in the mid-2000s.

Though speculators have been trimming their net long positions in recent weeks, cotton remains one of the few major agricultural markets that continue to have the support of the hedge fund crowd, according to Mr. Kohlmeyer. Their longs outweigh the shorts by a very dominant ratio of 12.3:1. Sugar traders are hanging on to their long position by the ratio of 1.3:1.

In other markets, raw sugar for May rose 0.4% to 16.30 cents a pound, cocoa for May added 0.7% to $1,828 a ton, arabica coffee for May delivery gained 0.2% to $1.3225 a pound and frozen concentrated orange juice futures for May gained 0.1% to $1.5750 a pound.

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

April 25, 2017 10:53 ET (14:53 GMT)