Cotton prices fell about 2 percent on Friday following losses in the grain market after US President Donald Trump threatened to place tariffs on imports from Mexico. Cotton also marked its worst month in nearly three years. The July cotton contract, settled down 1.26 cents, or 1.8%, at 68.08 cents per lb. It traded in a range of 68.00 and 69.69 cents per lb. "A lot of the price movement is a function of the commodity complex on a broader scale and that is the grains. You've seen the (grains) prices are down and such dramatic moves in those commodities are driving the whole complex sour," said Jordan Lea, senior trader at DECA Global.

US corn and wheat futures eased on Friday after Trump vowed to impose tariffs on all imports from Mexico if the country does not halt the flow of illegal immigration. "This is an import tax on Mexican goods. Under the current agreement we can send yarn/cotton duty-free and it comes back in duty-free," Lea said. "If Mexico retaliates, then we've got a problem."

The US Department of Agriculture (USDA) reported net sales of 288,800 running bales (RB) for the marketing year 2018/19 were down 24% from the previous week while exports of 410,600 RB were up 18%. The front month contract fell more than 10% this month, its biggest monthly percentage fall since August 2016, as investors lost hope for a quick resolution to the tit-for-tat tariff war between Washington and Beijing. Total futures market volume rose by 2,615 to 24,418 lots. Data showed total open interest fell 267 to 216,666 contracts in the previous session.

Certificated cotton stocks deliverable as of May 30 totalled 84,997 480-lb bales, up from 82,882 in the previous session. Data from the US Commodity Futures Trading Commission showed speculators trimmed their net short position in cotton by 982 lots to 37,900 lots in the week to May 28.

Copyright Reuters, 2019