NEW YORK: ICE cotton futures fell to a one-week low on Wednesday, tracking a drop in equities and grains, as escalating fears of a second wave of coronavirus weighed on the market sentiment.

The cotton contract for December fell 1.47 cent, or 2%, to 70.56 cents per lb by 2:11 p.m. EDT (1811 GMT). Prices of the front-month contract earlier hit their highest since May 7, 2019 at 72.60 cents.

Investors are concerned about the drop in financial markets, said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia. “We are also seeing harvest pressure come in and the market is grossly overbought and is trying to correct.”

Global stocks tumbled and grains declined on concerns that rising Covid-19 cases in Europe, the United States and elsewhere will force countries into lockdowns. Further weighing on the market, the dollar firmed, making cotton expensive for holders of other currencies.

“A potential for a second wave of lockdowns in Europe is bearish for the market,” Brown said, adding that the short term trajectory of prices will depend on the US presidential election and on any additional crop damage from the Texas ice storm.

Top growing state Texas has been battling snow and sleet, although the National Weather Service forecasts temperature to rise above freezing by midafternoon. Investors are also bracing for Hurricane Zeta, which is poised to crash into Louisiana with a “life-threatening storm surge” and winds that will reach far inland.

Total futures market volume rose by 3,888 to 37,621 lots. Data showed total open interest fell 6 to 248,103 contracts in the previous session.

Certificated cotton stocks deliverable as of Oct. 27 totaled 40,728 480-lb bales, up from 38,888 in the previous session.—Reuters