Cotton Falls From Highest Price Since March 2008 on U.S. Economy Concerns

Cotton fell from the highest price since March 2008 on signs the U.S. economic recovery will be fragile. Orange-juice futures dropped the most in more than three weeks.

In August, U.S. service industries grew at the slowest pace in seven months. The Institute for Supply Management’s index of non-manufacturing businesses fell to 51.5 from 54.3 in July. Readings above 50 signal growth.

“People I talk to are kind of nervous about the fact that we may have run it beyond the fundamentals,” said Sid Love, the president of Joe Kropf & Sid Love Consulting Services LLC in Overland Park, Kansas. “Is the world economy going to be robust enough to keep things going at these kinds of prices? I have doubts that it will.”

Cotton futures for December delivery fell 0.04 cent to settle at 89.45 cents a pound at 2:34 p.m. on ICE Futures U.S. in New York. Earlier, the commodity dropped as much as 1 percent after reaching 89.95 cents, the highest level for a most-active contract since March 5, 2008.

Output in the U.S., the world’s largest exporter, will rise to 18.823 million bales this year from 12.188 million last year, Memphis, Tennessee-based Informa Economics Inc. said today in a report to clients. A bale weighs 480 pounds (218 kilograms).

Yesterday, cotton closed at 89.49 cents, the highest settlement for a most-active contract since Oct. 4, 1995. Prices rose 3.9 percent this week, the second straight gain.

Yesterday “cotton prices were very strong and are consolidating those gains today,” John Flanagan, the president of Flanagan Trading Corp. in Fuquay-Varina, North Carolina, said in a report. “The market has moved higher quickly and is now overbought and due for a correction.”

Orange-juice futures for November delivery dropped 4.65 cents, or 3.3 percent, to $1.364 a pound in New York, marking the biggest decline since Aug. 10. The price fell 0.4 percent this week. The commodity is up 5.7 percent in 2010.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net.

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