Cotton Prices Drop on Tepid Demand, Supply Glut
The price of cotton is dropping as traders worry that slower economic growth will reduce consumers' demand for clothes and other goods made from the fiber.
Cotton for December delivery dropped 2.25 cents, or 3.1 percent, Tuesday finish at 71.05 cents per pound.
The price has fallen nearly 29 percent in the past 12 months as traders worry that consumers may cut their spending on cotton products. Economic growth has slowed in the U.S. and China and some European countries are sliding into recession.
At the same time, global cotton stockpiles are at a record high. That's given an advantage to cotton mills, which can take their time and choose when to make purchases, said Sharon C. Johnson, a senior cotton analyst with Knight Futures.
"Mills are buying but they're very price-sensitive," she said. "They're being very careful about going out and buying up too much cotton without having orders behind it."
In other trading, energy and metals prices were mixed after Federal Reserve Chairman Ben Bernanke addressed the Senate Banking Committee but didn't provide any hints about what the Fed may do to promote economic growth.
Many traders had hoped Bernanke would indicate that the Fed would start another round of bond purchases to drive down long-term interest rates and encourage more borrowing and spending.
Prices for gold and other commodities benefited from previous bond-buying programs. The low interest rates pressured the dollar, which weakened against other currencies. Commodities are priced in dollars, so a weaker dollar makes them more of a bargain for traders who use other currencies.
Gold for August delivery fell $2.10 to end at $1,589.50 an ounce and September silver fell 0.5 cent to $27.316 per ounce.
September copper fell 2.95 cents to finish at $3.4555 per pound, October platinum rose $3.40 to $1,420.70 an ounce and September palladium gained $5.50 to $583.35 per ounce.
Benchmark oil rose 79 cents to end at $89.22 per barrel in New York. Heating oil increased 1.45 cents to $2.8422 per gallon and wholesale gasoline fell 0.97 cent to $2.845 per gallon. Natural gas ended down 0.5 cent at $2.796 per 1,000 cubic feet.
Grains and beans were mixed. Corn for December delivery fell 1.25 cents to finish at $7.7125 per bushel, September wheat rose 0.5 cent to $8.85 per bushel and November soybeans were unchanged at $15.905 per bushel.