ICE Cotton Update
ICE Cotton forges ahead, set for best week in over 2 months on WASDE boost
ICE cotton futures on Friday moved to a contract high on momentum from the U.S. Department of Agriculture (USDA) cutting its production estimates, which put prices on track for their best week since early June.
Cotton contracts for December rose 1.23 cent, or 1.3%, to 94.55 cents per lb, by 1349 EDT (1749 GMT), extending its record-setting run to hit a new contract high of 94.70 earlier.
Prices have risen about 3% so far this week.
"Yesterday's report, which had some surprising figures on the production side, was really the catalyst that the market needed, and today is a follow through from that," Bailey Thomen, cotton risk management associate at StoneX Group, said.
The U.S. Department of Agriculture (USDA) on Thursday lowered its outlook for U.S. production by over half a million bales for the 2021/22 crop year, while world production estimates were also cut.
"Buyers continue to be very active. Mills are still searching for cotton. China came back in as a really big buyer last week, which was a positive sign as their domestic auctions have been selling out, and it was important to see them buy U.S. cotton," Thomen said.
Cotton futures were also buttressed by a sharp dip in the dollar and an uptick in Chicago wheat and soybeans.
"At the moment the market feels a lot tighter, with ready supplies seemingly exhausted and mills, along with the entire downstream sector, eager to get their hands on cotton and products," Peter Egli, director of risk management at British merchant Plexus Cotton, said in a note.
Egli added that a combination of supply chain disruptions and inventory build-ups is causing this panic-like demand surge, as shipments are often two to three months delayed, which forces mills and retailers to double-book in some cases and/or grab anything that is readily available.