Cotton Rallies as Dollar Drops
August 4, 2009 Bloomberg
Cotton prices jumped the most allowed by ICE Futures U.S. as the dollar dropped and equities advanced, boosting demand for commodities.
The greenback fell against a basket of six major currencies, extending a slide to the lowest in 10 months. The Standard & Poor’s 500 Index topped 1,000 for the first time since November on speculation that the worst of the global recession may be ending. Cotton jumped as much as 5 percent.
“It’s been a chain reaction,” said Ron Lawson, a managing director at Lawson/O’Neill Global Institutional Commodity Advisors LLC of Sonoma, California. “Better earnings lead to better stock rallies today, and on the back of that, cash flows into commodities, including cotton.”
Cotton futures for December 2009 delivery rose 2.83 cents, or 4.7 percent, to 62.85 cents a pound at 11:58 a.m. Monday on ICE in New York. Earlier, the price gained 3 cents, the exchange limit. The December 2010 contract close at 69.24, up 2.23.
“The demand is pretty assured as Chinese prices continue to improve every day,” Lawson said. “Production is the big question mark. The continued potential for irregular weather as La Nina switches to El Nino typically results in abnormal production, and it’s difficult to expect another record yield with an abnormal weather pattern.”
Cotton prices may reach 72 cents in the next few months, mainly because of consumption gains in China, Jarral Neeper, the president of Bakersfield, California-based cotton cooperative Calcot Ltd., said on July 28. Calcot represents about 1,400 cotton growers in the western U.S., including California, Arizona and New Mexico.
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