The worst-performing commodity of 2011 will resume that poor performance next year due to reduced consumption of cotton and a record-size crop of the soft fiber, according to Bloomberg.
Worldwide inventory of cotton is likely to be the largest since 2005 while the price of cotton futures is likely to continue losing value. The U.S. Department of Agriculture projects demand should fall to its lowest rate in three years at 114.27 million bales while harvests will advance 7.5 percent to 123.89 million 480-pound bales for the 12-month period completing in July. Cotton futures' record price of $2.197 per pound was established on March 7.
"It's a double whammy," James Dailey with TEAM Financial Management in Pennsylvania told Bloomberg. "Cotton is facing the worst-case nightmare for a commodity, where you have a glut in physical production combined with weakening demand."
At 1:35 p.m. on Thursday, cotton futures gained 0.23 percent, a 0.21 cent drop to 91.12 cents per pound.
Agrimoney reports sowing of cotton in China is likely to reduce next year, which also is projected to be more tepid throughout the world.
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.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
