NEW YORK—Cotton is back in fashion among U.S. farmers, a trend that has pushed prices to the lowest level in more than a year and a half.
Cotton for December delivery fell 0.6%, or 0.41 cent, to 72.06 cents a pound, the lowest closing price since Nov. 23, 2012, on the ICE Futures U.S. exchange Thursday. Prices are down about 24% from their peak in May of 94.75 cents a pound, which was their highest in more than two years.
Higher prices in the spring encouraged U.S. farmers to increase their cotton plantings for the first time in three years, according to data released by the U.S. Department of Agriculture last week. In addition, prices for crops such as corn fell in the spring, making cotton appear to be the better bet for some farmers.
That extra cotton may find fewer buyers this year, however. China, the world's biggest cotton consumer, is already sitting on massive stockpiles of the fiber, while polyester and other fabrics have become more popular.
The combination of high supplies and easing demand is weighing on cotton prices, analysts said.
Cotton growers in the U.S. planted 11.4 million acres with cotton this spring, 9.3% more than in 2013, according to the closely watched USDA annual acreage report. It was a sharp turnaround from the current season, which ends July 31, when U.S. farmers harvested their smallest cotton crop in four years.
Greater rainfall in parched areas of Texas, the top U.S. cotton-producing state, has also raised analysts' expectations for the size of this year's crop.
"My estimate is 16.4 million bales," said Sharon Johnson, a cotton specialist with KCG Futures. "It may be even bigger if Mother Nature truly cooperates."
Drought conditions have eased in Texas, according to the U.S. Drought Monitor, a joint venture of the USDA, the University of Nebraska-Lincoln and the National Oceanic and Atmospheric Administration.
A year ago, more than 12% of the state was experiencing "exceptional drought," the Drought Monitor's most severe rating, but that area has dropped to about 5%.
In addition to the bigger supplies this year, the U.S., the world's largest cotton exporter, is likely to see less demand for the fiber, according to some estimates.
Global cotton consumption is expected to rise by 3% next season, but imports are set to fall due to already robust stockpiles, giving the world a surplus of a record 21.43 million tons by the end of next July, the International Cotton Advisory Committee said. That would be enough to cover 11 months of consumption, said the Washington, D. C-based group, which advises cotton-growing countries.
"Demand remains weak, and China is expected to stay out of the market for now as it moves supplies from government inventories," said Jack Scoville, vice president at Price Futures Group in Chicago. "Chinese demand will be needed for big [price] rallies."
—Alexandra Wexler
