COTTON futures rebounded sharply yesterday, partly on news the US-east coast tropical storm Hermine had strengthened into a hurricane.
Comm Bank’s Tobin Gorey said the day’s trading was characterised by plenty of investor buying activity that only built momentum as the day progressed.
“The rally had a couple of drivers,” Mr Gorey said in Agri Commodities Daily Alert.
“Firstly, the US again reported strong cotton export sales, with over 350,000 running bales sold last week. A sign that perhaps the demand tide is, slowly, starting to come back in.
“Secondly, market chatter was centred on news that the tropical storm Hermine had strengthened into a hurricane. The weather system is expected to make landfall in northern Florida and then track up through south‑east Georgia and the Carolinas, bringing heavy rainfall.”
Mr Gorey said while the situation warranted close watching, it commentators were wary of overstating the potential impact on crops at this stage.
“Georgia and the Carolinas are forecast to produce around 23 per cent of total US upland cotton this season,” Mr Gorey said.
“As of last week about a quarter of crops in those states were in the open boll stage. So perhaps 4pc or so of the US crop will be vulnerable to damage. The result might prove to be even less if the system passes through quickly as meteorologists expect.”
Mr Gorey said regardless of the potential amount of crop potentially impacted, some investor sentiment was easily swayed by headlines.
“And auto‑pilot buyers will care not what has prompted the rally. The big moves overnight may have extinguished any weakness for now.”
The Australian Dollar followed the broader patter and starts today a shade above US75.5c.
