Texas Drought a Game Changer for Cotton Futures

The biggest state that grows cotton is suffering from dry growing conditions, according to the USDA’s findings released earlier today.  The government now says the US domestic cotton crop will be reduced by 3.6% which was further than market professionals predicted.

The USDA specifically stated for the year starting August 1st, cotton farmers may harvest one-half million bales less than predicted only last month.  This time last year, the domestic cotton crop was 17.3M bales.    

The cotton (futures) market is having some supply concerns.  If another problem area rises up, like we are seeing in Texas, and hinders supply we could see a very tight situation,” said Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current cotton futures situation.

The cotton futures market’s trend had been technically down until only recently.  I don’t like the idea of buying at these upper levels, so I will await a pull-back when the risk in cotton futures is lower.

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