Fresh US weather fears send cotton futures soaring

24.10.2017

Cotton futures soared the most since the hurricane rally on fresh US weather fears, at a time of upbeat hopes for the country's exports of the fibre.

Cotton futures for December stood up 4.1% at 69.59 cents a pound in late deals in New York, the highest since the limit-up performance prompted early last month by fears over Hurricane Irma.

The gains, which took futures above their 100-day moving average for the first time since the Irma rally, were attributed in part to rains over the weekend which threatened further damage to crop production and quality.

"More rain will risk greying up the fibre," so lowering its desirability, said Keith Brown at Georgia-based Keith Brown, adding that the squeeze on high-grade supplies was already seeing top-quality cotton earn a premium of some 4 cents a pound over futures.

Commodity Weather Group said that up to 3.5 inches of rain fell in the south east US Plains on Saturday.

Frost fears

Mr Brown also flagged talk of a fresh storm brewing in the Caribbean, as identified on a Fox hurricane watch, although the official US Hurricane Center is giving no risk of "tropical storm activity", at least within a 48-hour horizon.

Furthermore, there is talk of a crop-damaging frost next weekend, with Mr Brown flagging forecasts of a low of 33 degrees Fahrenheit on Friday in southern Texas, implying the potential for areas further north "to get something of a freeze".

However, he added that "people who know say you would need temperatures to stay in the upper 20s degrees for several hours to affect bolls of cotton".

Commodity Weather Group said that it would be "cold next weekend" in the southern Plains, but added that crop damage looked like proving "minimal".

Dr John Robinson at Texas A&M University said over the weekend that "upside volatility [in prices] might come from the production possibilities as a west Texas crop heavy laden with bolls races to finish before cold weather shuts it down".

Decent demand

The cotton price jump comes amid upbeat signs on US cotton exports, with Louis Rose noting that the US had already sold, or exported, 57% of cotton it expects to ship in 2017-18, which began in August, and so is less than one-quarter of the way through.

Sales for 2018-19 "stand in excess of 810,000 bales", he noted.

Weekly data on Thursday from the US Department of Agriculture are on US cotton export sales are "likely to prove near unchanged" on the strong performance of the previous week.

"It is generally thought that some business concluded at the recent International cotton Association meeting," in Singapore, "was not accounted for in the most recent export sales report", Mr Rose said.

'Delayed the inevitable'

However, Mr Rose was cautious on the price outlook, saying that "significant rallies are likely to be met with hedge pressure" from farmers selling crop.

Mr Brown said that while the weather setbacks may have "pushed the inevitable out further", in terms of stringing out the US cotton harvest, the large production looked set to come to bear,

He noted that in three of the last five years cotton prices had "bottomed out in November.

"I see now reason why this year should be different," he told Agrimoney.com.


agrimoney

Readers choice: TOP-5 articles of the month by UkrAgroConsult