by Agrimoney.com
The correction in cotton prices may have further to go even after fresh declines on Monday, when New York's best-traded contract fell to its lowest since September, and took to 24% its fall over the last month.
Cotton for December delivery, the first new crop contract, fell the maximum allowed in New York to hit 94.46 cents a pound before recovering some ground in late deals.
The old crop October contract also pared losses amid fears for the crop in Texas – the biggest cotton-producing state in the US, the top-ranked exporting country.
"The terrible Texas drought - which has already caused significant downward revisions to US cotton production prospects and may cause even further future revisions - may start supporting prices," Luke Mathews, at Commonwealth Bank of Australia, said.
"After all, US and global cotton supplies are already extremely tight."
The US Department of Agriculture last week pegged the overall abandonment of US cotton crops at "a record 30%", and is expected by many analysts to cut its yield forecast too, from levels close to last year's.
'Staggering demand losses'
But while some farmers are predicting yields of 50% below normal on non-abandoned land, Texas's "parched crop" can provide only limited support to prices, veteran soft commodities analyst Judith Ganes-Chase said.
"The loss in demand that has occurred as a result of sky high prices this year and uncertain economic conditions has far outweighed any bullishness over the Texas crop woes," Ms Ganes-Chase, at J Ganes Consulting, said.
"The losses in global demand are even more staggering."
New orders from Asian mills, major consumers, has "virtually stopped" after the rise in cotton prices to a record high of 227 cents a pound kept a lid on consumer demand, and encouraged a switch to other fibres.
And inventories in the US, while "still limited", are "just nowhere near as pinched as previously estimated".
'Room on the downside'
The dynamics of pressure on consumption, at a time when mills were being left with high-priced cotton inventories that were difficult to shift, meant that the global stocks-to-use ratio may "jumpy by a disproportionate amount", Ms Ganes Chase said.
The stocks-to-use ratio is a key measure of the availability of a crop, and therefore of its price potential.
For prices, "there still could be plenty of more room left to go on the downside as this historic bull market unravels", she said.
The longer the market remained near current levels, which are still high by a historical perspective, "the more demand is going to be lost and the harder the market will eventually fall".
'Demand is poor'
At PitGuru, Jurgens Bauer said that cotton prices "likely will seek to find a level of support between 90-100 cents a pound".
He added: "Whether or not that market can stage more than a temporary bounce is the question. Supply concerns aside, demand is poor."
US weekly cotton export sales for 2010-11 have been negative - meaning cancelled orders - in 15 out of the last 16 weeks.
New York's best-traded December cotton contract closed down 3.5% at 97.95 cents a pound, with the September lot finishing down 3.5% at 97.95 cents a pound.
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