The amount of money that speculators use to bet on price gains run the risk might decrease while cotton for May delivery sank five percent after Wednesday, when the settlement price was 31,345 (or $4,731) per metric ton on the Zhengzhou Commodity Exchange.
"The cotton market is wary of comments by Chinese officials that they will limit the effect of speculation in commodity markets," according to a report written by Luke Mathews, a commodity strategist at Commonwealth Bank of Australia.
Prior to Thursday, cotton futures surged 96 percent in China, the world's largest consumer of the soft commodity. The U.S. Agriculture Department projected that Chinese production of cotton will drop, which would continue depleting the nation's stockpiles to their lowest levels since 1995. Inclement weather during the past several months in Chinese high-producing regions also impacts the nation's supply.
"An increase in the Chinese lenders' reserve requirements by 50 basis points sent jitters through the agriculture market, and cotton, which is particularly reliant on Chinese purchases, felt the full effect," according to Mathews.
Cotton futures for March 2011 delivery were down 2.7 percent to 137.4 cents per pound on the Intercontinental Exchange.
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