Cotton futures jumped as high as 4% Monday, reaching a new decade high, as data supplied by weather forecasters say drought conditions in Texas could tighten supplies. The front-month contract in New York hit $1.41 a pound, the highest intraday level since May 2011.
Cotton futures have soared nearly 9.5% in the last three sessions. Prices are coming back in on Monday after hitting a new decade high. Prices around 0950 ET are around $1.36. The latest spike in prices has been due to drought fears in Texas and Ukraine conflict tightening supplies.
Bloomberg cited new data from weather forecaster Ajay Kedia, director at researcher Kedia Commodity, who indicated drought conditions for West Texas would pressure supplies. Texas is the largest state in terms of production; the US is the number three producer in the world.
Weather concerns “will definitely add some fuel to the prices,” he said, adding that cotton could extend its rally to $1.53 in the coming months.
Earlier this month, the National Oceanic and Atmospheric Administration published a new report forecasting between April to June, much of the western US, including Texas, will struggle with severe to exceptional drought conditions.
“There is a high possibility if things continue this way we can touch $2 also,” Kedia warned. He said prices have also been increasing due to the Ukrainian conflict and crude and fertilizer prices soaring.
Cotton is the most common natural fiber to make clothing, accounting for a third of all the world’s fibers found in textiles. If cotton prices soar even higher, plus rising farm costs such as fertilizer and diesel, and increasing freight costs, the cost of clothing will continue to climb.