NEW YORK: ICE cotton futures fell about 2% on Friday due to increased chances of rains in producing areas of Texas next week, putting prices on track for their biggest weekly drop since March 2020.
Cotton contracts for July fell 1.78 cents, or 2.1%, to 83.20 cents a pound at 12:15 p.m. EDT (4:15 p.m. GMT), with the July contract at its lowest in a month.
There is a risk of rain in Lubbock, West Texas, and other growing areas several days next week and “that is a game changer,” said Jordan Lea, senior trader at DECA Global.
Recent grain declines have also put pressure on prices, Lea said. Chicago corn, wheat and soybeans rose on Friday, recovering from losses a day earlier.
The first month’s contract has lost around 6.5% so far this week, setting it up for its worst week since mid-March 2020.
“New York futures have crumbled this week,” Peter Egli, director of risk management at UK-based merchant Plexus Cotton, said in a May 13 memo. -consumption of several products, including soybeans and cereals “.
“For the market to trade much lower at this point we will need to see a decent harvest on the ground and we are still several months away,” the note adds.
Expectations for rain in West Texas, or the lack thereof, have been the main driver of the natural fiber market this month, analysts said, and short-term market performance is largely based on on them.
“If something is wrong in Texas and / or if we see more acres moving away from cotton in other parts of the country, it could ignite the market,” the Egli note said.