NEW YORK: ICE cotton futures fell for a second session on Monday, pressured by the forecast for rainfall in West Texas and also tracking a dip in key grains markets.
Cotton contracts for July, fell 1.71 cents, or 1.9%, at 87.95 cents per lb by 12:23 p.m. EDT (1623 GMT), having dropped by as much as 2.9% earlier in the session.
Corn is sharply lower, along with beans and wheat and that is spilling over into cotton, said Keith Brown, principal at cotton brokers Keith Brown in Georgia.
Chicago corn futures fell on Monday as the market took a breather after a rally to eight-year highs on Friday. Wheat and soybeans also fell from recent highs.
“The most bearish factor” is the “significant rain chances forecasted for West Texas over the six to ten-day outlook. At the very least, market participants can see that rain can fall across the region over recent weeks,” Louis Rose, director of research and analytics at Tennessee-based Rose Commodity Group, said in a note.
Cotton requires lots of water and if rains fail, that would significantly impede production, likely driving up prices.
Further, if key-growing regions in West Texas do not receive rainfall soon, farmers “would have to plant a late crop, which subjects them to hurricanes and adverse weather during fall harvest,” Brown said.
Focus across core agricultural markets now turns to the World Agricultural Supply and Demand Estimates (WASDE) report from the US Department of Agriculture (USDA), likely to be published on Wednesday.
“The prospect of a favorable crop report this afternoon and profit-taking/liquidation ahead of Wednesday’s WASDE release,” are also affecting prices, Rose’s note added.—Reuters
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