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Home / Futures Blog / Cotton futures sensitive to rainy and dry weather

Cotton futures sensitive to rainy and dry weather

August 24, 2011 by Daniels Trading

Inclement weather has done its part to push down the quality of cotton yet dense U.S. growing regions for the soft commodity might be fortunate enough to dodge a bullet, according to published reports.

Hurricane Irene will not be as harmful as it could be to two states' cotton harvest, Bloomberg reports. The tempest was initially projected to run over roughly 25 percent of cotton crops in Georgia, which is the U.S.' second-largest growing state, the news service reports. South Carolina also was in Irene's trajectory.

But the trajectory has changed, according to the National Hurricane Center. It will stay offshore from the continental U.S. and brush the coast of North Carolina on Sunday, continuing on toward New England later that day or early Monday.

Damage to cotton crops in the Southeast U.S. will be minimized due to the new trajectory, said Mike Stevens, an independent trader based in Louisiana.

In Texas, the nation's highest-producing state, lack of rain plus high temperatures has equalled severe circumstances that have been more damaging than anything farmer Kelli Merritt ever has seen.

Having grown up on land in West Texas that she presently tills, Merritt told South East Farm Press that parched land is one byproduct of the worst drought in more than 100 years.

"We've had droughts before," she told the publication. "Even when we're in a drought, we can receive a rain at the right time and make a fair crop. So, I thought we still had a shot at making a crop (in 2011). "That turned out not to be true and our dryland crop never had a chance."

Also the president of CropMark Direct, an outfit that provides cotton growers with marketing services, Merritt monitors crop challenges and difficulties while also noting cotton futures' ebbs and flows on the market.

Cotton futures are on the rise, according to Forex Pros. The soft fiber was up in value more than 2 percent on Wednesday, according to a U.S. Agriculture Department report indicating last week's condition of U.S. crops was low and issues with Pakistani supplies also tightened worldwide inventories.

More than 60 percent of cotton crops in Texas were pegged as "poor" or "very poor" and, by contrast, only 13 percent of crops registered as "good" or "excellent."

Flooding in Pakistan reduced the nation's 2010-11 cotton crop harvest to 8.8 million bales as compared to last year's production. The worst flood on record pushed down output by more than 8 percent.

The soft commodity presently is trading at less than half its record price, which it set in early March. Cotton's all-time high is $2.197 per pound, which was established on March 7.

At 2:31 p.m. on Wednesday, cotton futures slipped 0.24 percent, a .0025 cent drop to $1.0499 per pound.

The Virginia cotton crop is aiming higher, according to Chris Drake, agent for the Cooperative Extension in Southampton County. He told Tidewater news that farmers may anticipate "a decent year" while also noting prospects are elevated but not so much as to challenge prices from the first quarter of 2011.

This year's output could be "an average crop and (there's) the potential for one well above," Drake told the publication. "Historically, it's better than before. As of August 18, cotton futures were at $1.04 per pound. In the early part of 2011, the price was $2, but it's not likely to get back to that level."

Though the brunt of the hurricane will miss Georgia and South Carolina, the regions are likely to endure some rainfall that follows Irene. That moisture is good for the development of cotton crops.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Archived News

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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