Cotton Declines as Demand Eases Following Biggest Weekly Rally Since 1971

Cotton futures fell on signs that demand is slowing from China, the world’s biggest consumer, after prices posted their biggest weekly rally in 39 years. Orange-juice futures rose to a three-year high.

U.S. export sales of upland cotton to China fell to 193,179 bales in the week ended Nov. 25, down 23 percent from the average during the previous four weeks, the U.S. Department of Agriculture said on Dec. 2. Total U.S. exports dropped 26 percent from the average. Before today, futures in New York declined 13 percent from a record on Nov. 10.

“It could be a little bit of pushback on these prices overseas,” said Andy Ryan, a senior risk-management consultant at FCStone Fibers & Textiles in Nashville, Tennessee. “For sure there has been some pushback” with fewer imports by China, Indonesia, Pakistan and Turkey, he said.

Cotton for March delivery fell 1 cent, or 0.8 percent, to $1.3134 a pound at 10:01 a.m. on ICE Futures U.S. in New York. Earlier, prices declined as much as 3.3 percent.

Last week, the most-active contract jumped 18 percent, the biggest weekly gain since July 9, 1971. Cotton rose to a record $1.5195 on Nov. 10, and then plunged 12 percent over the next two days.

“The market was getting ahead of itself,” Ryan said. Still, prices are up 72 percent this year and should remain “relatively strong” this week, he said.

Cotton use in China is forecast to fall to 47 million bales in the year ending July 31, down 6 percent from last season, the USDA said on Nov. 9. The agency will update its projections on Dec. 10. A bale weighs 480 pounds, or 218 kilograms.

U.S. inventories held in warehouses monitored by ICE have increased 12-fold from a 2010 low of 8,910 bales in October. As of Dec. 3, stockpiles totaled 106,606 bales, down 74 percent this year.

Orange-juice futures gained for the fourth straight session as cold weather threatened citrus groves in Florida, the world’s biggest orange producer after Brazil.

“Mother Nature is reminding us that, yes, it can get cold and we can have damage,” said Sterling Smith, an analyst at Country Hedging Inc. in St. Paul, Minnesota. “That’s increasing some risk premium,” he said.

Orange juice for January delivery rose 9.7 cents, or 6.2 cents, to $1.665 a pound in New York. Earlier, the price rose as much as 6.3 percent to $1.667, the highest since May 2007.

Last week, seven analysts estimated that prices may reach $1.646 by the end of the year on increased risk of frost damage. In 2009, orange juice advanced 8.2 percent in December.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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