Cotton prices fell 4 percent Thursday as China took another step to curb inflation after consumer prices rose more than expected in April.
Investors are concerned that China's latest move to slow its economy will curb demand for cotton in the months ahead. Cotton for July delivery fell 6 cents to settle at $1.443 a pound.
Trading in commodities was driven largely by movements in the dollar. Many contracts pared early losses as the dollar grew weaker during the day. Since commodities are priced in dollars, a weaker dollar makes them cheaper for buyers using other currencies.
China has been battling high inflation for months. It ordered most of its banks on Thursday to increase the amount of money they hold in reserves in an effort to curb inflation after higher-than-expected price rises in April. It was the fifth reserve increase this year.
Global cotton supplies remain tight and consumption is expected to improve this year, according to the U.S. Agriculture Department. China was forecast to produce more cotton this year and buy more from other countries to meet demand.
In the United States, cotton planting has been delayed in several states due to bad weather and flooding.
Penson/FCG analyst Sharon C. Johnson said she believes the impact of higher cotton prices earlier in the year has caught up with the market. The price has fallen about 33 percent since it settled at $2.1515 a pound in early March.
"We suddenly just seemed to run into a roadblock when it came to demand," Johnson said.
In other trading, wheat prices fell after rain was predicted for parts of the Southern Plains where the winter crop has been plagued by dry weather.
Telvent DTN analyst John Sanow believes any precipitation that hits the region may be too late to help the crop. "It is in such poor condition that I just don't see it bouncing back even with some rain," he said.
In contracts for July delivery, wheat fell 23.5 cents to settle at $7.355 a bushel, corn rose 3.25 cents to $6.805 a bushel and soybeans rose 11 cents to $13.4275 a bushel.
Oil prices settled slightly higher. Benchmark crude for June delivery rose 76 cents to settle at $98.97 per barrel on the New York Mercantile Exchange.
In other Nymex contracts for June, heating oil rose 1.54 cents to settle at $2.9137 per gallon, gasoline futures fell 5.89 cents to $3.0639 a gallon and natural gas rose 1.5 cents to $4.256 per 1,000 cubic feet.
Metals were mixed. In July contracts, silver fell 71.8 cents to settle at $34.797 an ounce, copper rose 5.7 cents to $3.9705 a pound and platinum fell $6.80 to $1,771 an ounce. June palladium rose $1.45 to settle at $716.85 an ounce.
Gold for June delivery rose $5.40 to settle at $1,506.80 an ounce.