ICE cotton surges to 2-month high amid weather concerns, weaker dollar

17 Sep '24

2 min read

ICE cotton surges to 2-month high amid weather concerns, weaker dollar

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Insights

ICE cotton futures surged to a two-month high due to a weaker dollar, rising crude oil prices, poor crop conditions, and weather concerns, including Tropical Storm Francine.
The December 2024 and March 2025 contracts rose significantly, with the December contract settling at 72.82 cents per pound.
Technical signals further reinforced bullish momentum, with futures crossing key moving average.

ICE cotton unexpectedly surged to a two-month high. Although internal and external factors supported cotton futures, the sharp rise in ICE cotton caught many by surprise. Yesterday, a weaker dollar index, rising crude oil prices, hopes for a Fed rate cut, poor crop conditions, and forecasts for another hurricane contributed to the significant rise in cotton futures.

The December and March 2025 ICE cotton contracts jumped by 300 points yesterday. The December contract settled at 72.82 cents per pound (0.453 kg), while the March contract closed at 74.24 cents. These were the highest levels for both contracts since mid-July.

The dollar index traded lower ahead of the Federal Reserve meeting, settling 0.4 per cent lower, which supported the rise in cotton futures amid robust demand. Crude oil also rose by more than 1.5 per cent, increasing the cost of polyester, a cotton alternative.

Total trading volume reached 79,400 contracts, the highest since mid-April. On Friday, 27,213 contracts were cleared, reflecting strong market activity.

On the weather front, Tropical Storm Francine likely contributed to the bullish sentiment, bringing 2-5 inches of unwanted rain to the Delta and Southeast regions. Further rain is expected in the Carolinas due to a tropical cyclone, with the possibility of another disturbance arising next week.

Speculators may reconsider their positions due to unfavourable weather conditions, possibly prompting them to exit rather than hold during this period of uncertainty.

The market rally wasn't driven by any breaking news. Instead, technical signals indicated that the market was primed for an upward movement. December futures crossed the key 100-day moving average, which ended at 72.10 cents. Additionally, the contract closed above the 10-day, 20-day, 40-day, and 50-day moving averages for the fourth consecutive session, reinforcing its bullish momentum.

Currently, ICE cotton for December 2024 is trading at 72.69 cents per pound, down 0.13 cents. Cash cotton traded at 67.25 cents (up 2.27 cents), the October contract at 71.75 cents (up 2.27 cents), the March 2025 contract at 74.00 cents per pound (down 0.24 cents), the May 2025 contract at 74.96 cents (down 0.29 cents), and the July 2025 contract at 75.61 cents (down 0.20 cents). A few contracts remained at the previous closing levels, with no trading noted today.

Fibre2Fashion News Desk (KUL)

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