Cotton and wheat prices rebound as fears of supply shortages mount
Cotton prices rose to 131.7 cents per pound yesterday – its highest level since June 2011.
Markets were buoyed by robust demand for US cotton from China as its economy rebounds from the pandemic, while elevated oil prices have raised the prices of synthetic fibres.
Commerzbank analyst Carsten Fritsch noted that there has also been little rainfall in Texas over the last month- the leading US cotton growing state, which could result in crop shortfalls this year.
He said: “Funds and speculators have apparently jumped on the bandwagon now, though the latter had still been reducing their net long positions slightly in the previous reporting weeks.”
Meanwhile, wheat prices have also enjoyed gains after falling from record highs last week – as conflict in Ukraine escalates.
The forward contract for US wheat – traded on the CBOT – gained five per cent to reach 1,119 cents per bushel.
In Europe, UK prices have risen to £300.90 per tonne, while EU wheat prices closed four per cent up at €377 per ton on the Euronext yesterday.
Fritsch expects prices to rise further over the course of today.
He explained: “This is because market participants are realising that the war in Ukraine is likely to continue for some time yet, meaning that wheat shipments from the Black Sea region will no doubt remain severely restricted. No wheat is currently reaching the market from Ukraine because ports are closed.”
According to the chairman of the Ukrainian Grains Association, the lack of grain exports could see Ukraine lose out on $6bn in export revenue by June.
While 20m tonnes of wheat and corn are apparently still available for export, but cannot be transported by rail for reasons of capacity.