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Reply #9: Cotton Crop Reaching Record Makes Goldman Bearish: Commodities [View All]

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xchrom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-01-11 06:59 AM
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9. Cotton Crop Reaching Record Makes Goldman Bearish: Commodities
http://sfgate.adc.bloomberg.wallst.com/SFChronicle/Stor...

Dec. 1 (Bloomberg) -- The combination of a record cotton crop and falling consumption will expand global stockpiles by the most since 2005, driving further declines in the price of this years worst-performing commodity.

Harvests will increase 7.5 percent to 123.89 million 480- pound bales (27 million metric tons) in the 12 months ending in July, as demand drops to a three-year low of 114.27 million bales, the U.S. Department of Agriculture estimates. Prices may decline 15 percent to 77 cents a pound on ICE Futures U.S. in New York by the end of next year, from 90.91 cents now, based on the median of 12 analyst estimates compiled by Bloomberg.

Its a double whammy, said James Dailey, who manages $215 million of assets at TEAM Financial Management LLC in Harrisburg, Pennsylvania. Cotton is facing the worst-case nightmare for a commodity, where you have a glut in physical production combined with weakening demand.

Cotton fell 58 percent since reaching an all-time high of $2.197 in March as investors bet that prices would curb demand and encourage supply. Output is rising from Australia to China to India, more than compensating for a U.S. decline caused by the worst crop conditions since the dust bowl era of the 1930s. Speculators in U.S. futures are now the least bullish in 2-1/2 years, Commodity Futures Trading Commission data show.
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