US drought pushes cotton prices to ten-year high
Cotton prices rose to their highest level in more than a decade on Monday, due to a prolonged drought in parts of the central United States.
The plant fiber reached $1.3171 per pound (about 453 grams) on the key US futures contract, the highest since July 2011. Rainfall has been exceptionally low since early January in the northwest part of Texas -- which produces about 40 per cent of all US cotton production.
Depending on the region in the United States, cotton is planted from March to June, so there is uncertainty in the market about size of this year's crop, according to John Robinson, a professor at Texas A&M University and cotton specialist.
Many are already comparing the current weather conditions to 2011, when US cotton producers experienced their worst drought ever and prices rose as high as $2.27 per pound. The drought this time is hitting an already tight market because of a pandemic-related increase in demand for cotton textiles as people spend more time at home.
In addition, there has been a demand increase in China, by far the world's largest producer and importer.
Another contributing factor is the soaring price of pesticides, which are widely used on cotton farms and are derived from petroleum.
While high cotton prices were expected to lead to a sharp increase in US acreage, the cost of pesticides is expected to limit that growth, Arlan Suderman of broker StoneX told the local PBS station in Iowa.
Added to that is a wave of speculative buying, driven by accelerating prices, Robinson said.