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Thursday, October 11, 2012

USDA raises cotton stock estimate again; prices fall

The US Department of Agriculture has raised its 2012/13 global ending stock forecast for cotton to record highs for a third consecutive month, sending prices down and reinforcing concerns about weakening demand from China, the world's largest textile market.

The government raised its inventory forecast for the season to end-July 2013 by 3.4 percent to a record of 79.11 million 480-lb bales due to a combination of sharply higher production and reduced consumption.

It was its third monthly increase since the new marketing season started on Aug. 1 and the highest since records began in 1960. The new total would also represent a 14-percent jump from 2011/12's 69.56 million bales.

Market participants were alarmed that the USDA cut its consumption rate for China by 2 million bales to 36 million, citing falling demand from mills, which have bought less due to high domestic prices.

"The high domestic support price continues to erode offtake," the report said.

It also raised its output forecast for the world's top three producers, China, India, the United States, as well as other major growers Brazil and Pakistan, taking the total up 2 percent to 116.32 million bales.

"It's a bearish rollercoaster," said Keith Flury, senior commodities analyst at Rabobank, pointing to falling consumption estimates for China, the world's largest user.

The benchmark December cotton futures in New York were down 1.5 percent at 71.02 cents per lb on track for their largest one-day fall in two weeks.

Prices fell as low as 70.41 cents immediately after the publication of the USDA report, but recovered some lost ground after hitting near-term technical supports. Before the report's release, prices were down 1.08 percent at 71.32 cents.

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Tags:  USDA  grains  soy  agriculture  US  





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