March 24 (Bloomberg) -- Cotton prices fell for the first time in four sessions as U.S. equities declined, dimming prospects for demand of the fiber used in clothing and textiles.

The Standard & Poor’s 500 Index fell as much as 1.6 percent after capping its steepest two-week gain since the 1930s. Cotton merchants sold futures after prices topped 44.7 cents a pound, or 12 cents above the weekly adjusted world price, analysts said.

“We are not really trading cotton fundamentals but those of an economic recovery on a macro scale that eventually reflects on fiber demand,” Sharon Johnson, a senior cotton analyst at First Capitol Group in Atlanta, said yesterday in a report.

Cotton futures for May delivery fell 0.72 cent, or 1.6 percent, to 44.31 cents a pound on ICE Futures U.S. in New York. Yesterday, the price touched 45.1 cents, while the world price reached 32.73 cents in the week ending March 20. The most-active contract jumped 7.9 percent in the previous three sessions.

The U.S. Department of Agriculture calculates and publishes the weekly price as part of a federal subsidy program to reflect what an importer will bid for U.S. fiber. The spread of 12 cents may cover shipping and other costs. Producers and merchants receive a payment should they sell cotton to the government when the weekly average is below 52 cents.

“Merchants are able to redeem cotton from the loan and sell futures at a profit,” Jurgens H. Bauer, the head of brokerage Jurgens Bauer & Associates in New York, said today in an e-mail.

Cotton has dropped 9.6 percent this year as global consumption declined and exports slumped from the U.S., the world’s biggest shipper.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.

Last Updated: March 24, 2009 15:39 EDT