NEW YORK: ICE cotton futures jumped 3% to their highest in nearly four months on Wednesday, after lower US planting estimate and dry weather concerns in the top growing-state Texas, prompted investors to cover short positions.
The December contract, rose 1.70 cents, or 2.8%, at 62.58 cents per lb by 1:55 p.m. EDT (1755 GMT). Prices earlier rose to their highest since March 9 at 62.79. "With the low acres, people began looking at weather and Texas continues to be hot and dry, so we're seeing a lot of short covering by speculators and even net buying," said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia.
The United States Department of Agriculture's (USDA) June acreage report on Tuesday showed an estimated planted area of 12.2 million acres for all cotton in 2020, down 11% from last year. Although cotton prices have declined by more than 11% so far this year due to reduced demand amid the pandemic, the contract ended last month and quarter with encouraging gains.
"This lower acreage number, along with continued less than desirable weather in West Texas could push the December contract toward the 200-day moving average around 63-64 cents in the near future," Ron Lee, general manager at McCleskey Cotton in Georgia, said in a note on Tuesday. Total futures market volume rose by 6,263 to 28,427 lots. Data showed total open interest gained 1,762 to 161,481 contracts in the previous session.
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