NEW YORK: ICE cotton futures rose on Wednesday as the dollar fell to a fresh two-year low and on concerns of crop damage due to Hurricane Hanna, which hit in the United States' biggest growing region, Texas, over the weekend.
Cotton contracts for December rose 0.51 cent, or 0.8%, to 61.62 cents per lb by 1:31 EDT (1731 GMT).
"The market is up as the dollar is weak, and there's a really small chance that the tropical cyclone in the Atlantic could crawl its way into the Gulf (of Mexico)," said Rogers Varner, president of Varner Brokerage in Cleveland.
The dollar declined 0.3%, making commodities priced in the greenback cheaper for holders of other currencies.
Investors were also concerned about the loss of crop due to Hurricane Hanna, which pummeled the Texas coast, where farmers were already struggling with hot and dry conditions.
"The crop in south Texas was definitely damaged (due to Hanna), its hard to tell how much because we're still getting damage assessments, but excessive amounts of rain can pull the cotton lint out of the bolls," Varner said.
Meanwhile, a system in the Atlantic near Leeward Islands could make its way to the Gulf of Mexico in the coming days.
Cotton prices have dropped over 12% so far this year as demand declined because of a global pandemic.
"Ongoing infections, waning consumer confidence, and a global economic recession maintain a challenging outlook. We don't expect a full pre-Covid 19 demand recovery for cotton until 2021/22 at the earliest," Rabobank said in a note.
Market participants were now awaiting the United States Department of Agriculture's (USDA) weekly export sales report due on Thursday.
Total futures market volume fell by 1,715 to 10,375 lots. Data showed total open interest fell 609 to 173,711 contracts in the previous session.
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