NEW YORK: ICE cotton futures jumped to a near eight-month high on Monday as fears about the quality of the natural fiber increased after Delta passed through major crop growing areas as a powerful hurricane last week.
Cotton contract for December rose 1.01 cent, or 1.5%, to 68.65 cents per lb, at 1:42 pm EDT (1742 GMT).
The December contract earlier jumped as much as 2.7% to hit its highest since Feb. 21 at 69.47 earlier.
"The Hurricane Delta has raged over Louisiana and done extensive damage to the crop. On the other hand, China, which is the biggest importer of US cotton, is slowly opening up its economy after months of virus-led lock down," said Ed Jernigan, chief executive of Jernigan Global, a cotton textile supply chain manager.
"So, the storm has created a supply crunch at a time when demand is going up and that is getting reflected in the prices."
Delta, which has now dissipated, made landfall on Friday evening near the southwestern Louisiana town of Creole as a Category 2 hurricane.
On the technical front, the December contract was technically overbought with a relative strength index (RSI) of over 83 on Monday. An RSI of less than 30 signals oversold, while over 70 signals overbought.
"We are susceptible to downward correction here. Technical factors will play a part but demand hasn't been strong until now and is not going to get any stronger with higher prices and lower quality," said Jack Scoville, vice president at Chicago-based Price Futures Group.
Total futures market volume fell by 5,558 to 26,728 lots. Data showed total open interest gained 2,802 to 230,955 contracts in the previous session.-Reuters