Coffee Nears Decade High on Mounting Supply Worries

(Bloomberg) -- Cotton futures retreated from 10-year highs on signs higher prices are hurting demand for supplies from top shipper U.S. 

American sales to overseas customers were 46% below the four-week average, government data showed. Purchases from key customer China have eased significantly from a peak in September. The Asian nation recently announced it would sell reserves to cool domestic prices amid signs that its economy is slowing.

Cotton for March delivery fell 1.8% to $1.1495 a pound on ICE Futures U.S., on pace for the biggest drop since Nov. 4. A day earlier, the commodity reached the highest for a most-active contract since 2011 amid speculation that India, the biggest producer, is mulling measures to restrict exports to quell soaring domestic prices. 

While certified cotton stockpiles tracked by ICE depots have nearly vanished, traders said there’s enough supply as harvesting picks up after early delays. Domestic production will be bigger this year, with shipping snags keeping supply from reaching warehouses and buyers.

Open interest has fallen during the latest gains, which indicates shortcovering of previously sold positions drove the rally, not new bullish wagers.

In other soft markets, arabica coffee futures also fell from the highest price in almost a decade. Raw sugar also dropped. The Brazilian real slid a fourth day against the U.S. dollar, boosting incentives for the world’s biggest exporter of both crops to sell commodities priced in the greenback. 

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