Commerzbank warns against cotton fervour
Commerzbank urged investors against getting too gloomy and warned against over-exuberance in cotton – even as futures in the fibre extended a retreat
But for cotton, while the bank hiked its forecasts for New York-traded futures by up to 11 cents a pound, the revised estimates were close to levels hit on August 9, 2016 – a second day of strong retreat in values.
Indeed, December futures stood down the exchange limit of 3.0 cents a pound in late deals, at 73.05 cents a pound, in a retreat fuelled by China’s decision earlier this week to extend to the end of next month its auction of fibre from huge state stockpiles.
Commerzbank, highlighting the boosts by the US Department of Agriculture to estimates for the world production deficits in 2015-16 and 2016-17, said that “there are substantial fundamental reasons for the recent price buoyancy given the additional deficit that is on the cards.
However, it also flagged the threat that higher cotton prices pose for demand. “There are likely to be some pretty tight limits for any increase in price level because this would mean a loss of competitiveness as compared with artificial fibres.”
“In other words, although there is certainly some justification for a higher price level than a few weeks ago, a temporary setback in prices would not come as any great surprise.”