Tags: Cotton | Bear | Market | Supply

Cotton Futures Enter Bear Market as Global Supply Grows

Wednesday, 25 June 2014 09:08 PM

Cotton fell into a bear market as improving prospects for crops in the U.S., the world’s biggest exporter, added to signs of abundant global supplies.

Ample rains in the past two months have eased drought conditions in Texas, the leading U.S. grower, said Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas. In the season that starts Aug. 1, domestic output may rise 16 percent from a year earlier amid increased plantings, the U.S. Department of Agriculture projects.

Futures slumped 11 percent this year through Wednesday. The bigger American crop will supplement stockpiles in China, pushing global inventories to the highest ever, USDA data show. The glut increases chances for lower costs for companies including Hanesbrands Inc. and jeans maker Levi Strauss & Co.

“We’re going to have a very good crop, and that’s a problem,” Mike Seery, the president of Seery Futures in Plainfield, Illinois, said in telephone interview. “The market doesn’t have any good fundamentals, there’s just going to be a lot of supply.”

Cotton for December delivery lost 1.6 percent Wednesday to settle at 75.26 cents a pound on ICE Futures U.S. That marked a 21 percent drop from this year’s settlement high of 94.75 cents on May 5, meeting the common definition of a bear market.

The U.S. economy contracted 2.9 percent in the first quarter, more than forecast and the worst reading in five years, the government said. Domestic farmers may collect 15 million bales in 2014, up from 12.91 million last year, the USDA said June 11. A bale weighs 480 pounds, or 218 kilograms.

“To have the economy shrink like that indicates that things are slowing down,” Sid Love, the president of Sid Love Consulting Services in Overland Park, Kansas, said in a telephone interview. “It isn’t necessary for consumers to buy clothes or a new pair of jeans. This will have an impact on demand.”

“Cotton costs will decline slightly in the second half of the fiscal year compared to the second quarter” ended March 30, Laurence G. Sellyn, chief financial officer at Montreal-based Gildan Activewear Inc., said in an earnings call May 2.

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Cotton fell into a bear market as improving prospects for crops in the U.S., the world's biggest exporter, added to signs of abundant global supplies.
Cotton, Bear, Market, Supply
Wednesday, 25 June 2014 09:08 PM
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