NEW YORK: ICE cotton futures rose on Tuesday on mill fixations and on expectations that sparse rains recently may offer little respite for the natural fibre from a dry spell in Texas, a top growing region.
Cotton contracts for May rose 0.50 cent, or 0.6%, to 87.22 cents per lb at 12:52 PM EDT.
“There are concerns about continuing dryness in west Texas; even with the rain that was recorded out there, it is still dry,” said Jim Nunn, owner of Tennessee cotton brokerage Nunn Cotton.
Prices fell as much as 2.3% in the previous session on hopes that rains in west Texas would benefit the crops. “There have been mill fixations with this market drop and we also have seen some new business going on,” Nunn said, adding sentiment in cotton markets got a further fillip from gains in equities markets.
Wall Street’s S&P 500 index scaled a new high on Tuesday, while a gauge of global equities rose to within 1% of an all-time peak.
But a stronger US dollar limited cotton’s advance, since it translates into higher prices for buyers holding other currencies.
“We see prices remaining elevated in the coming quarters as supply is tight amid the robust Covid-19 economic recovery and strong pick-up in demand in 2021,” Fitch Solutions said in a note, raising their 2021 average cotton price outlook to 87 cents per lb.
In its weekly export sales report, on Thursday, the US Department of Agriculture showed that net sales of 212,000 running bales (RB) for 2020/2021 were up 25% from the previous week, even though exports of 351,600 RB were down 7%.
Total futures market volume fell by 9,007 to 11,505 lots.