USDA seen reducing domestic crop amid continued uncertainty
Higher energy costs are lending support to commodities
Cotton futures surged in New York on signs of smaller supplier in top shipper US.
On Wednesday, the US Department of Agriculture may cut its estimate for domestic production by about one half million bales, which would lead to a reduction of stockpiles, a Bloomberg survey showed.
There’s continued uncertainty over how much severe weather, including drought and heavy rain, cuts production in top grower Texas and other states for the 2022-23 season. The USDA also last month surprised the market by raising its projection for national output.
“The market is up notably today probably because of analysts’ expectations of tighter balance sheets in this week,” said analysts Louis Rose at Rose Commodity Group. Higher oil prices are also supporting prices because that drives up agricultural, processing and transportation costs.
Meanwhile, recent heavy rain of more than four inches in India’s Haryana region may affect the quality of the cotton crop there, Drew Lerner, the president of World Weather Inc. said by telephone. Crops in West Texas got rain over the weekend, and cotton bolls that were spurred by recent moisture need consistent warmer conditions, he added.
Cotton for December delivery climbed as much as four cents, or the maximum daily allowed by ICE Futures US to 88.23 cents a pound.
The fiber also tends to draw support from surging grains, which compete for land in some regions. Russia’s attack on Kyiv and other Ukrainian cities fueled worry that an escalating war will stymie agriculture exports out of the Black Sea.
Still, cotton is sharply down from decade highs reached earlier this year amid demand concerns while higher interest rates lift the dollar, eroding the appeal of greenback-priced commodities.
US retail sales for apparel fell in the seven months through Sept. 23, and unless there’s a clear change in demand prospects around the globe, rallies will be limited, analysts said.
In other soft commodities, cocoa futures; raw sugar and arabica coffee edged lower.
