* Cotton declines from highest price since May 2012
* Dollar, commodities basket pressure fiber prices
* May-March spread narrows for first time in eight sessions
By Chris Prentice
NEW YORK, Feb 21 Cotton posted its largest
one-day loss in nearly a month on Thursday, as prices corrected
down from the nine-month highs reached earlier this week and as
declining oil and grain prices pressured fiber.
The most-active May cotton contract on ICE Futures U.S.
fell 1.23 cents, or 1.5 percent, to settle at 83.23 cents
per pound. That was fiber's largest decline since falling about
2 percent on Jan. 25.
Though prices rebounded after earlier touching as low as 83
cents, they failed to approach the nine-month highs reached
earlier this week. Tuesday's run-up to more than 85 cents, the
highest price since May 2012, prompted a price correction.
"Given how much we rose on Tuesday and Wednesday, it's not
unusual to see the market pull back," said Peter Egli, director
of risk management for Plexus Cotton Ltd, a British-based
Cotton rose as high as 84.87 cents on Tuesday and then
breached that high on Wednesday in a surge to 85.24 cents.
Wednesday's morning rally proved unsustainable, with the market
only posting a slight increase by the day's close. The downward
momentum continued on Thursday.
Cotton prices were also pressured by outside markets.
"You've got the dollar surging higher, which makes U.S.
cotton exports a little more expensive," said Chris Kramedjian,
a risk management consultant for INTL FCStone.
The dollar index reached a five-month high, after
registering its biggest one-day gain in seven months during the
previous day's dealings.
The Thomson Reuters/Jefferies CRB index fell, as
oil dropped to three-week lows. A decline in wheat and
corn, cotton's competition for acreage, added to the
While the U.S. government has forecast that plantings of
eight major U.S. field crops, including cotton, will be 1
percent lower next year, the USDA revised higher the projections
it made earlier this month.
The spot March cotton contract on ICE settled down
0.97 cent, or 1.1 percent, at 81.31 cents a lb.
The May-March contract spread narrowed for the first time in
eight sessions, to 1.92 cents per lb. It remained one of the
highest premiums the second month has held to the spot contract
since May 2012.
Speculators have driven the recent price rally, with cotton
up nearly 9 percent since the start of the year. The surge
followed two years of losses, as fiber met competition from
lower-priced, man-made alternatives and global inventories grew.
Rising prices have drawn merchants and producers to bring
cotton to the exchange. Certified stocks are the highest since
July 2010 at more than 307,000 480-lb bales on Wednesday,
according to ICE data. Another 53,000 bales awaited review by
the USDA on Thursday.
That compares to about 95,000 bales listed on the exchange
at the start of the year and about just 8,000 in October 2012.
(Reporting by Chris Prentice; Editing by Bob Burgdorfer)