For week ended May 12, about 30,500 bales of U.S. cotton to be delivered by July 31 were cancelled, according to information from the U.S. Agriculture Department. Since March 7, when the soft fiber notched record prices of $2.197 per pound, cotton prices have slumped 29 percent. Analysts correlated those issues with slackening demand from the top consumer of cotton, which is China.
"There are demand problems," Jack Scoville, a vice president at Price Futures Group Inc. in Chicago. "We can't have canceled sales all the time and see any kind of tight demand that would drive prices higher."
On Thursday, cotton futures closed down 2.63 percent, a 0.0421 cent drop to $1.5565 per pound.
Flooding in regions surrounding the Mississippi River and droughts in China and Texas helped push up cotton prices 11 percent during the past four sessions as concerns about supplies bandied about.
China also canceled 44,000 bales of cotton for week ended May 12.
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.