FX.co ★ Cotton review for 21/10/2010

Cotton futures hiked to the highest level for more than 140 years on Thursday amid huge purchases from China в четверг amid huge huge purchases from the Chinese side and fears regarding bad harvest this year that can lead to a sharp reduction of global deliveries.

After opening the trades on ICE the December contract for cotton broke through the mark of 1.1980 dollar/pound , which was a 15-year high before.
The cotton prices started rising in July due to the demand recovery after the recession. Floods in Pakistan and strong rains in China influenced on the harvest detrimentally that has led to a breakthrough of 1dollar/bushel rate.

The panics has slightly eased after the reports of the Indian and American governments on good production, but the cotton demand of China did not show the downtrend signs that supported the prices.

According the data of the US Agriculture Department, China bought 267.700 cotton bales last week that has made more than one-half of export. The market did not expect such values that was reflected in active purchases.

During the recession the factories were cutting their expenditures and cotton reserves because of price downturn that has resulted in deliveries decrease.
The traders say that high prices will impact negatively the factories profits, as the current price level will lead to easing of the demand for cotton goods.