Cotton futures enter bear market

Prospects for strong supplies prompted cotton futures to slip in value on Thursday, one day after falling into a bear market, according to Bloomberg.

The health of crops in the U.S. is strong, which bodes well for supplies considering the nation is the world's top shipper of the soft commodity. Regions of top-growing state Texas endured strong rains during the past eight weeks, which nourished plants and closed a drought.

The U.S Department of Agriculture forecast cotton production in the U.S. will rise 16 percent during the season beginning August 1 as compared to the same period one year earlier.

"We're going to have a very good crop, and that's a problem," president Mike Seery with Seery Futures in Plainfield, Illinois told the news source on Thursday. "The market doesn't have any good fundamentals, there's just going to be a lot of supply."

With a record price of $2.197 per pound as established in March 2011, cotton futures have dropped roughly 11 percent thus far this year.

Global supplies likely to rise
World supplies of the soft fiber will climb following strong production in the U.S. China is poised to gather its top supplies ever as a result of strong production, according to data released by the Agriculture Department.

On Wednesday, prices of cotton futures were 21 percent lower than the highest settlement from earlier this year, which was 94.75 cents per pound. That officially pushed cotton futures into a bear market.

The federal agency also noted that farmers in the U.S. are likely to gather 15 million bales of cotton this year, which represents an increased from the 12.91 million bales that they collected in 2013.

Prospects for cotton demand remain in doubt after economic data earlier this week indicated gross domestic product shrank 2.9 percent during the first quarter of this year.

"To have the economy shrink like that indicates that things are slowing down," president Sid Love with Sid Love Consulting Services in Overland Park, Kansas told the news source on Thursday. "It isn't necessary for consumers to buy clothes or a new pair of jeans. This will have an impact on demand."

Australian demand to surge
But demand for the soft commodity in Australia is forecast to be strong.

The Land reports Cotton Australia signed on to a pact that might aid growers of cotton in the South Pacific nation access the international market. The deal with the Better Cotton Initiative aims to benefit the country's cotton-growing sector.

Cotton Australia said the involvement of growers of cotton may be at the level they choose. The top official said the pact bodes well for both Australia and the wider cotton sector.

"This agreement recognizes Australia's leading role in the production and promotion of responsibly grown cotton," chief executive officer Adam Kay said, according to The Land. "Access to future growth markets is of tremendous importance to Australian cotton growers, particularly as they contend with competition from synthetic fibers."

Slow demand pressures prices in Southeast Asia
In Southeast Asia, the price of cotton was being pinched by slow demand, The Dawn reports.

India has endured monsoon rains that might have damaged some crops. In Pakistan, the Karachi Cotton Association slashed spot prices for a second consecutive trading session on Thursday.

The price of cotton also has suffered as a result of losses that the Chinese yuan has suffered. Considered one of the stronger-demanding nations, China has seen its monetary unit lose value. In turn, that reduces the pace of of shipments of cotton yarn to the Asian nation from Pakistan.

Exports of the Pakistani product to China have increased in price as a result of losses that the renminbi has endured, cotton analyst Naseem Usman told the news source.