cotton futures

Cotton futures drop to 2-week low amid strong dollar, export decline

  • ICE cotton futures hit a two-week low due to the strong dollar and lower exports.
  • December cotton contract falls to 84.28 cents per lb, down 0.31 cents.
  • Market confidence is also undermined by rising bond yields and mixed corporate earnings.

ICE cotton futures experienced a decline, reaching a two-week low on Thursday due to a combination of factors, including a stronger dollar and reduced exports of natural fiber.

The leading December cotton contract (CTZ3) dropped by 0.31 cents to settle at 84.28 cents per lb by 11:55 p.m. EDT (1555 GMT), after hitting a low of 83.25 cents earlier in the session.

The increased strength of the dollar played a role in this decrease, as it made cotton more costly for holders of other currencies.

The US Department of Agriculture’s weekly export sales report further exacerbated the situation, revealing a drop of 47% in net sales of cotton for 2022-2023 compared to the previous week. The sales were also notably lower than the average of the prior four weeks.

Keith Brown, the principal at cotton broker Keith Brown and Co. in Georgia, described the data as “terrible,” highlighting that new crop sales were not robust either, as countries awaited their own crop evaluations before committing to purchasing cotton.

Additionally, weakened confidence in broader markets due to rising bond yields, mixed corporate earnings, and persistent inflation impacted cotton’s upward trajectory.

However, the increase in oil prices resulting from Saudi Arabia’s extension of output cuts partially mitigated the cotton losses.

This extension made polyester, a cotton substitute, more expensive. Notably, China’s sale of a substantial amount of cotton from its state reserves was viewed as a favorable fundamental, indicating potential crop trouble and supply concerns.

Meanwhile, Chicago wheat futures saw a slight increase, influenced by global supply considerations, including significant Russian exports and disruptions to shipments from Ukraine due to conflicts.