Cotton declines by limit in Zhengzhou as China tightens lending

Cotton futures declined by the maximum allowed by the Zhengzhou Commodity Exchange on speculation that China’s move to tighten lending may curb the amount of money used by speculators to bet on price gains. Cotton for May delivery declined 3.1 per cent to 31,345 yuan ($4,724) a metric tonne on the Zhengzhou Commodity Exchange at 9:49 am local time.

China’s central bank yesterday raised lenders’ reserve requirements as October’s larger-than-forecast $27.1 billion trade surplus threatened to accelerate inflation. Excessive speculation has spurred cotton trading in Zhengzhou, said Zhou Wangjun, the deputy director of pricing at the National Development and Reform Commission. “An increase in the Chinese lenders’ reserve requirements by 50 basis points sent jitters through the agriculture market, and cotton, which is particularly reliant on Chinese purchases, felt the full effect,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a report today.