Cotton, Sugar Prices Take a Beating

NEW YORK (TheStreet) -- Sugar prices were plummeting as Thailand is expected to flood the market with record output.

Official data from Thailand shows that sugar output from the Southeast Asian country will reach about nine million metric tons this year, 30% greater than the 2009 to 2010 crop year.

Sugar for July delivery was down 2.3% to 21.73 cents a pound.

Meanwhile, official data indicates that the Brazilian sugar crop will rise by 2% to 631 metric tons, while Mexico sugar production has increased 15% to 4.72 metric through late April.

"Although 2% higher than last year's harvest, there is much concern that high energy prices will see a large amount of sugar diverted to ethanol production," notes PFG Best Senior Analyst Robin Rosenberg."This would in effect decrease the edible crop size."

While supplies are expected to grow, the analyst notes the China's needs could also intensify. While the country claims that its sugar needs have been fulfilled for now, Rosenberg says that import data indicates that the amount of sugar China has already bought versus what they still need "do not jive."

Chinese sugar imports for March fell 38.8% to 43,387 metric tons from last year, while cumulative imports have tumbled 10.9% to 79,323 metric tons from last year. "I would not be surprised to see China become an aggressive importer soon," says Rosenberg, as China faces a deficit of almost 2 million metric tons of sugar this year.

Cotton was also falling as the markets continued to expect waning cotton demand from China, following a recent report by cotton intelligence firm Cotlook that textile orders from the country were slowing.

Cotton for July delivery was falling 2% to $1.549 a pound.

Still, veteran cotton analyst Mike Stevens said he believes that the panic selling will pass and prices will stabilize.

"After being soundly beat up under weakening fundamentals, cotton prices seemed to find support Friday, and may be ready for a bounce, if even a proverbial dead cat bounce," he remarked.

Apparel and accessories companies, many of which had complained about lofty cotton prices, were trading in the red. Coach(COH_) was falling 1.2% to $59.10, Polo Ralph Lauren(RL_) was falling 1% to $ 129.50, V.F. Corporation(VFC_) was ticking 0.4% lower to $100.17 and The Gap(GPS_) was losing 1% at $23.

Deere(DE_), an equipment maker for cotton and sugar cane harvesters, was down 0.1% to $97.39. Food giant General Mills(GIS_) was rising 1.2% to $39.03, and its peerKellogg(K_) was up 0.3% to $57.45.

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