NEW YORK: ICE cotton futures on Friday fell about 2% on increased chances of rains in producing regions in Texas next week, putting prices on course for their largest weekly drop since March 2020.
Cotton contracts for July fell 1.78 cents, or 2.1%, at 83.20 cents per lb by 12:15 p.m. EDT (1615 GMT), with the July contract at its lowest in a month.
There is a chance of rain in Lubbock, West Texas, and other producing regions on multiple days next week and "that's a game changer," Jordan Lea, senior trader at DECA Global, said.
Recent dips in grains also pressured prices, Lea said. Chicago corn, wheat and soybeans rose on Friday, recovering from losses suffered a day earlier.
The front-month contract has lost about 6.5% so far this week, setting it up for its worst week since mid-March, 2020.
"New York futures cratered this week", Peter Egli, director of risk management at British merchant Plexus Cotton, said in a note dated May 13. Contributory factors, he said were "basis pressure from competing origins, notably Australia, combined with some profit-taking in several commodities, including soybeans and grains".
"For the market to trade much lower at this point, we will need to see a decent crop in the field and we are still several months away from that", the note added.
Expectations for rain in West Texas, or the lack of it, have been the primary market driver for the natural fibre this month, analysts said, and that the near-term performance of the market largely on them.
"If anything were to go wrong in Texas and/or we see more acres shifting away from cotton in other parts of the country, it could ignite the market," Egli's note said.
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