Cotton futures declined by the maximum allowed in China on speculation that the country’s move to tighten lending may curb the amount of money used by speculators to bet on price gains. Cotton for May delivery declined 5 percent from yesterday’s settlement price to 31,345 yuan ($4,731) a metric ton on the Zhengzhou Commodity Exchange at the 11:30 a.m. local-time trading break. China’s central bank yesterday raised lenders’ reserve requirements as October’s larger-than-forecast $27.1 billion trade surplus threatened to accelerate inflation. China’s consumer prices jumped 4.4 percent from a year earlier in October, the fastest pace in two years. Excessive speculation has spurred cotton trading in Zhengzhou, said Zhou Wangjun, the deputy director of pricing at the National Development and Reform Commission. “The cotton market is wary of comments by Chinese officials that they will limit the effect of speculation in commodity markets,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a report today. Before today, cotton futures in Zhengzhou had surged 96 percent this year as production in China was forecast by the U.S. Department of Agriculture to lag behind domestic demand for a 12th year, pushing the nation’s stockpiles to the lowest since the marketing year ended 1995. March-delivery cotton futures on the ICE Futures U.S. in New York declined 0.6 percent to $1.4022 a pound. The contract surged to a record $1.5195 yesterday before slumping by the exchange limit of 6 cents to close at $1.4111. Market Jitters “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,” Mathews said. ICE Futures U.S. increased the margins for cotton yesterday, in response to a jump in volatility. That “was certainly one of the several factors” that led to a decline in futures, Mike Stevens, an independent trader in Mandeville, Louisiana said yesterday. Before yesterday, futures had surged 95 percent this year as the U.S. Department of Agriculture forecast that the global market will remain in deficit for a fifth straight year as harvests fail to keep pace with demand. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net To contact the editor responsible for this story: James Poole in Singapore at jpoole4@bloomberg.net

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