Cotton trades near 4-week low after ICAC cuts global demand outlook

Forexpros - Cotton futures edged higher on Thursday, but remained close to a four-week low after the International Cotton Advisory Board slashed global demand estimates for the fiber.

On the ICE Futures U.S. Exchange, cotton futures for March delivery traded at USD0.9357 a pound during European afternoon trade, edging 0.2% higher.

It earlier rose by as much as 0.45% to trade at a session high USD0.9389 a pound. On Tuesday, prices fell to USD0.9316, the lowest since January 3.

The ICAC cut its forecast for world cotton demand for the 2012-13 marketing season by more than 510,000 tonnes from a previous estimate, citing slower global economic growth.

Demand for cotton, as a non-food agricultural commodity, is seen as more closely linked to economic conditions and consumer sentiment than that for other farm crops.

The ICAC added that while there has been "improvement" in demand for the fiber in recent weeks, this represented only a "short-term respite".

Cotton prices have lost nearly 7% since climbing to a two-month high of USD0.9946 on January 24, as concerns over the global economic outlook raised concerns over a slowdown in demand for the fiber.

Meanwhile, prices were underpinned by worries over cotton crop conditions in the U.S.

On Wednesday, agribusiness financial service provider Rabobank raised its average cotton price forecast for the first quarter of 2012 to USD0.9500 a pound, saying a longstanding drought in the main southern growing states of the U.S. "remains a concern".

Meanwhile, cotton traders shrugged off a broadly stronger U.S. dollar and negative developments surrounding talks between Greece and its private creditors to restructure the country’s debt.

Eurogroup head Jean-Claude Juncker said earlier that talks with private bondholders on a debt swap deal for Greece were “ultra-difficult”.

An agreement is necessary for Greece to secure the next tranche of bailout funds in order to prevent a sovereign debt default, as the country does not have enough money to cover a EUR14.5 billion bond repayment due March 20.

Elsewhere, on the ICE Futures Exchange, coffee futures for March delivery rose 0.53% to trade at USD 2.1488 a pound, while sugar futures for March delivery slumped 0.75% to trade at USD0.2350 a pound.