Forexpros – Cotton futures rose to a three-week high on Tuesday, as fresh concerns over cotton crop conditions in India coupled with a broadly weaker U.S. dollar drove prices higher.
On the ICE Futures U.S. Exchange, cotton futures for March delivery traded at USD0.9228 a pound during late European morning trade, jumping 1%.
It earlier rose by as much as 1.15% to trade at USD0.9241 a pound, the highest since December 9.
U.S. Department of Agriculture officials in New Delhi said earlier that the slow pace of Indian cotton exports was “beginning to raise questions about the accuracy of prior crop estimates.”
The USDA slashed its forecast for Indian cotton production for the 2011-12 marketing season by 127,500 tonnes to 5.82m tonnes.
The downgrade reflected poor weather conditions in Maharashtra, India’s top cotton-producing state. Furthermore, Indian farmers face “increasing difficulty finding labor” to harvest their crop, with farmers in central India preferring to grow soybeans.
India is a major cotton exporter and competes with the U.S. for business on the global market. Downbeat Indian crop prospects could boost demand for U.S. supplies.
Meanwhile, prices drew additional support from a broadly weaker U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, retreated 0.6% to trade at 80.10.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
Global financial service provider Commerzbank said in a report last week that it expected cotton prices to average USD1.10 a pound in the second half of 2012, citing increased purchases from top consumer China.
The fiber plunged nearly 37% in 2011, the most since 2004, making it one of the worst performing commodities last year. Cotton prices have plummeted nearly 60% since hitting a record high of USD2.197 a pound on March 7.
Elsewhere, on the ICE Futures Exchange, coffee futures for March delivery eased up 0.05% to trade at USD 2.2688 a pound, while sugar futures for March delivery rallied 1.05% to trade at USD0.2359 a pound.
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