April 1 (Bloomberg) -- Cotton futures fell as lower U.S. grain prices reduced the incentive for farmers to plant less fiber. Coffee prices also declined.

Corn fell 2.2 percent today, and soybeans recovered from a 0.9 percent decline to close unchanged. Farmers may plant 8.81 million acres of cotton this year, down 7 percent from 2008, in order to grow more-profitable crops, the U.S. Department of Agriculture said yesterday. Cotton merchants sold futures after pulling supplies out of the federal-loan program, analysts said.

“The area of price around 46 cents and above makes redemption levels possible and profitable,” said Rogers Varner, the president of Varner Bros. in Cleveland, Mississippi. Lower grain prices and a stronger dollar also pushed cotton down, he said.

Cotton futures for May delivery fell 0.32 cent, or 0.7 percent, to 46.15 cents a pound on ICE Futures U.S. in New York. Earlier, the price reached 46.78 cents, the highest for a most- active contract since Feb. 12.

Farmers can borrow about 52 cents a pound by using their cotton crops as collateral in the federal loan program. Supplies are usually taken out of the program when the spread between a world price, set by the USDA, and futures is at least 12 cents. Last week, the USDA set the global price at 33.83 cents a pound.

Producers in the program can repay loans at about 52 cents a pound, plus interest, or at the adjusted weekly world price for upland cotton, according to the USDA.

In another ICE market, arabica-coffee futures for May delivery slipped 1.25 cents, or 1.1 percent, to $1.145 a pound. The price has gained 2.2 percent this year.

In London, robusta coffee for May delivery fell $22, or 1.4 percent, to $1,533 a metric ton on the Liffe exchange.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

Last Updated: April 1, 2009 17:47 EDT