Prices Commodity Cotton fall as China Curb Inflation

The commodity of cotton prices fell 4 percent as China took another step to curb inflation after consumer prices rose more than expected in April. Investors are concerned that China's latest move to slow its economy will curb demand for cotton in the months ahead. Cotton for July delivery fell 6 cents to settle at $1.443 a pound.

Trading in commodities was driven largely by movements in the dollar. Many contracts pared early losses as the dollar grew weaker during the day. Since commodities are priced in dollars, a weaker dollar makes them cheaper for buyers using other currencies.

China has been battling high inflation for months. It ordered most of its banks on Thursday to increase the amount of money they hold in reserves in an effort to curb inflation after higher-than-expected price rises in April. It was the fifth reserve increase this year.

Global cotton supplies remain tight and consumption is expected to improve this year, according to the U.S. Agriculture Department. China was forecast to produce more cotton this year and buy more from other countries to meet demand.

In the United States, cotton planting has been delayed in several states due to bad weather and flooding.

Penson/FCG analyst Sharon C. Johnson said she believes the impact of higher cotton prices earlier in the year has caught up with the market. The price has fallen about 33 percent since it settled at $2.1515 a pound in early March.

"We suddenly just seemed to run into a roadblock when it came to demand," Johnson said.

In other trading, wheat prices fell after rain was predicted for parts of the Southern Plains where the winter crop has been plagued by dry weather.

Telvent DTN analyst John Sanow believes any precipitation that hits the region may be too late to help the crop. "It is in such poor condition that I just don't see it bouncing back even with some rain," he said.

In contracts for July delivery, wheat fell 23.5 cents to settle at $7.355 a bushel, corn rose 3.25 cents to $6.805 a bushel and soybeans rose 11 cents to $13.4275 a bushel.

Oil prices settled slightly higher. Benchmark crude for June delivery rose 76 cents to settle at $98.97 per barrel on the New York Mercantile Exchange.

In other Nymex contracts for June, heating oil rose 1.54 cents to settle at $2.9137 per gallon, gasoline futures fell 5.89 cents to $3.0639 a gallon and natural gas rose 1.5 cents to $4.256 per 1,000 cubic feet.

Metals were mixed. In July contracts, silver fell 71.8 cents to settle at $34.797 an ounce, copper rose 5.7 cents to $3.9705 a pound and platinum fell $6.80 to $1,771 an ounce. June palladium rose $1.45 to settle at $716.85 an ounce.

Gold for June delivery rose $5.40 to settle at $1,506.80 an ounce.

In Karnataka, price of cotton which had been ruling high for nearly one year, took a sudden plunge at the APMC market here leading to protests from the farmers. Traders, however, complained the falling prices were due to an increase in the inflow of bales into the APMC yard and if the ban on export of cotton was lifted, it may increase.

At a meeting held jointly by Karnataka Chamber of Commerce and Industry and the members of business community under the banner of Karnataka Cotton Association, the members decided to stop purchasing cotton from today.

The President of the Association V P Lingangoudar and Vice President of Karnataka Chamber of Commerce Vasant Ladwa, who led the meeting, moved the resolution for stopping cotton purchase, which was unanimously accepted.

The meeting expressed its deep anguish over the steep decline in the price of cotton said trading would be stopped till the Union Government gave opportunity for export of cotton which was recently banned by the Union Government.

The farmers and traders decided to go on strike on May 13 to express displeasure over the injustice caused due to ban on export.

The members of trading community and the farmers would take out a procession from all APMCs of Karnataka and submit memorandum to the government through TahsiLdar of respective taluks, Mr V P Lingangoudar told reporters today.

He also said another protest march would be held to submit memorandum to the government through the Deputy Commissioner of each district.

The meeting also condemned the decision of raising tax on cotton from four per cent to five per cent.