Why cotton prices are soaring

Why cotton prices are soaring

Ines Ferré · Markets Reporter

A summer t-shirt may cost you a bit more in the coming months. Cotton prices are soaring.

Futures for the commodity were trading at their highest levels since 2011 this week, surpassing $1.48 per pound on the The Intercontinental Exchange (ICE).

"Cotton prices have soared lately," Dennis Sweeney, CEO of Infinity Brokerage, told Yahoo Finance. "Availability is scarce."

A big part of the price action is weather related, says the agricultural commodity trader. West Texas, the largest cotton producing region in the U.S., is seeing the worst drought conditions in decades.

The lockdowns in China haven't slowed its demand for supplies coming from the U.S., the world's largest exporter of the commodity.

Energy prices are also a contributing factor. Demand for cotton has increased as the price of materials derived from oil has gone up.

As other commodity prices rise amid high energy prices, some farmers are opting to change their planting pattern.

“Some cotton areas have been lost to soybeans, corn and other products where prices have already skyrocketed giving farmers a greater bang for their bank,” said Sweeney.

The World Bank expects cotton prices to surge 40% this year. The upward movement isn’t expected to stop anytime soon. Prices have been increasing in 20 of the past 23 months.

“Looking forward, cotton demand remains firm, and the outlook for the coming growing season looks quite challenging,” added Sweeney.

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre


Source: finance.yahoo.com
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