Cotton prices fell nearly 2% on Tuesday, dragged down by falling crude
oil prices and a lack of follow through buying of the natural fibre
after hopes of a deal between the United States and China last week.
Cotton contracts for December settled down 1.21 cent, or 1.9 %, at 61.38
cents per lb. It traded within a range of 60.8 and 62.56 cents a lb.
"Cotton is following the oil prices today, which are falling with the
improving situation in Saudi Arabia (following the attacks)," said
Bailey Thomen, cotton risk management associate with INTL FCStone.
Oil prices dropped 6% on Tuesday after Saudi Arabia's energy minister said the kingdom has fully restored its oil production hit by an attack this weekend. Falling crude prices also make synthetic fibres cheap, making cotton less appealing. Last Thursday, the monthly US government World Agriculture Supply and Demand Estimates (WASDE) projected lower export sales, while a weekly report showed a cut in US exports.
"Last week, we saw lower export sales and cancellations from China. But the market was too excited about Trump's friendly move with China. But nothing has really happened on the trade war front since then. Investors are just quitting their positions," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.
Trump said on Tuesday his administration could seal a deal on trade with China before the US presidential election, or an agreement could be reached the day after US voters go to the polls. Prices have fallen over 15% so far this year on the backdrop of the protracted trade war between the United States and China, one the leading consumers of the natural fibre.
Meanwhile, the United States Department of Agriculture's (USDA) crop progress report on Monday said 41% of US cotton was in good to excellent condition, compared with 43% reported last week. Total futures market volume rose by 3,688 to 33,201 lots. Data showed total open interest gained 181 to 233,209 contracts in the previous session.