Slowing demand of cotton will prompt a seasonal shortage of the soft fiber that is 24 percent smaller as compared to what was originally forecast in March, according to an industry analyst based in England.
Bloomberg reports the reduced demand is attributable to the whims of China, which is the globe's biggest buyer and generator of the commodity, a report from Cotlook states. For the season ending July 31, the demand from China is 9.8 million tons, which is 188,000 tons less than the amount that was originally projected. Consequently, the new estimate is 414,000 metric tons, which is lower than the 548,000 originally forecast.
"Statistics confirm recent anecdotal reports of slowing mill consumption of raw cotton on various markets," the Cotlook report states.
Cotton futures closed Monday having slipped 0.67 percent, a 0.0112 cent drop to $1.6639 per pound.
During the past year, cotton futures have nearly doubled, which analysts attribute to a global shortage of the soft fiber.
"A significant recovery in world supply remains in prospect during 2011-12," according to the Cotlook report.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
