US cotton exports plunge as soaring prices spook mills

NEW YORK - Cotton export sales more than halved this week to their lowest level since early November, sending prices to one-week lows and reinforcing concerns that the sticker shock after the fiber's five-week rally has already quashed mills' appetite for fiber.

Net exports of upland cotton totaled 93,600 running bales for the week up to Jan. 31, down 58 percent from the four-week average and off 29 percent from the previous week, when exports also fell, the U.S. Department of Agriculture said on Thursday.

The sales were "terrible", one U.S. broker said, coming at the height of the marketing year as China's season to end-March draws to a close and ahead of the country's Lunar New Year week-long holiday. The U.S. season will end on July 31.

Concerns about the impact of soaring prices had mounted after over 11,000 bales were canceled from China, the world's largest textile industry, in last week's data when front-month prices rallied to seven-month highs of 84 cents.

But the pace and size of the withdrawal have highlighted how quickly buyers would turn away from fiber when prices get too high.

In the week to Jan. 31, prices averaged 82 cents a pound, well above the 80-cent mark, a level considered critical for mills' appetite for raw material.

"The U.S. is definitely being choked off at these higher price levels," said Peter Egli, director of risk management for Plexus Cotton Ltd, a British-based medium-sized merchant.

Consumption of natural fiber has already been hit by the sluggish global economy and a loss of market share to lower-priced manmade fibers after wild swings in prices over the past four years roiled the market.

The most-active March cotton contract on ICE Futures U.S. slid 0.32 cent, or 0.4 percent, to settle at 81.40 cents per pound on Thursday, its third down day of the week.

Waning appetite for fiber comes at a crucial time for the industry, which is facing a record ending stocks carryover this year of more than 82 million 480-lb bales.

While global output is expected to fall to about 118 million 480-lb bales, it will still exceed demand of 106 million bales even after Beijing has replenished its already-massive strategic stockpile.

The other big change in the data was China's fall to 13th place out of the 22 countries that purchased fiber in the last week of January.

Despite the dip in exports, the high shipment rate offered some comfort to merchants who feared that surging prices would prompt further cancellations.

"Every week we ship, we breathe a sigh of relief that there weren't cancellations," one U.S. broker source said.

Shipments hit a high for the U.S. marketing year of 440,100 running bales. That figure, which includes sales previously booked that shipped in the week, often shows a seasonal uptick through mid-March, brokers said.

Cotton futures are down 2 percent from Friday's close. A five-week price rally ran out of steam this week as buying slowed and high stocks weighed on prices.

Speculative money has flooded into the cotton market this year, with noncommercial investors raising their longs to the highest level in more than two years.

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