Cotton Jumps on Lower Forecast for U.S. Plantings
Prices Rose to a Nearly Three-Month High on Expectations of a Drop in U.S. Supply
NEW YORK—Cotton prices rose to a nearly three-month high on Monday on expectations of a drop in U.S. supply.
The National Cotton Council said over the weekend that it expects the number of U.S. acres planted with cotton in the spring to fall by 15% from 2014 to the lowest level in six years.
The drop in acreage “reflects cotton’s poor price versus that of corn, soybeans or grain sorghum,” which is prompting farmers to switch away from the fiber toward those crops, said Sharon Johnson, senior cotton specialist and introducing broker for Wedbush Securities, in a note.
The March cotton contract gained 1.2% to 62.30 cents a pound, the highest price since Nov. 11, while the May contract rose 1.8% to 62.73 cents a pound.
Traders are also waiting for the U.S. Department of Agriculture’s World Agricultural Supply and Demand Estimates report, slated for release on Tuesday. Analysts surveyed by The Wall Street Journal expect the USDA to raise its forecast for cotton exports to 10.6 million bales from 10 million bales in its previous report, based on strong weekly export sales in January.
Also on Monday, cocoa prices jumped to a nearly two-week high on concerns that dry weather could crimp the crop in major producer Ghana.
The most actively traded May cocoa contract rose 3% to $2,866 a ton, the highest price since Jan. 20. Prices rose for the fifth straight session and posted the largest one-day percentage gain since Oct. 13, 2014.
The March contract rose 3.3% to $2,867 a ton.
Cocoa futures slumped to the lowest price in more than a year last week as weak demand for the key chocolate ingredient weighed on the market.
But traders are now focused on the Harmattan, a dry, dusty wind that blows through the region at this time of year. It can rob cocoa trees of moisture and block out sunlight, reducing the number of pods the trees produce.
Ghana is the second-largest cocoa producer in the world, after Ivory Coast.
Cocoa “looked like it was on sale here this past week,” said James Cordier, principal at OptionSellers.com, who expects prices to rise further. “We think that demand is probably better than a lot of perception has been the last few weeks.”
In other markets, the March contract for frozen concentrated orange juice rose 3.2% to $1.4070 a pound.
The March raw-sugar contract gained 2.1% to 14.82 cents a pound, while March arabica coffee rose 0.5% to $1.6760 a pound.