October 2, 2022

Cotton Prices Soar After Historic USDA Cut Amid Megadrought

“Worst I have ever seen”

US cotton prices continued to surge above the  boom days of 2010-11 after a  massive harvest estimate cut by the UNITED STATES DEPARTMENT OF AGRICULTURE, shocking Wall Street experts and traders, due primarily to a  megadrought scorching farmland of Texas, in accordance to  Bloomberg .  

Futures in New York pertaining to December delivery were up 4. 5% to $1. 1359 a pound or more more than 21% this month.

“ I don’t think you can put a top on prices right now, ” Louis Barbera, the handling partner for VLM Commodities, told Bloomberg.  

“ I have already been going to Texas for more compared to ten years, and this is by far the  absolute worst I have ever seen, ” said Barbera.    

What Barbera can be referring to is the  drought situation in Texas . The long extends of triple-digit temperatures plus limited rainfall this summer possess turned vast amounts of  cultivated fields to dust, hurting cotton farmers in the South Flatlands of West Texas.  

Last Friday, the  USDA’s bigger-than-expected cut in order to domestic cotton crop  surprised many on Wall Street.   Crop output plunged to 12. 57 million bales, the lowest in a 10 years. The cut also pressed down the US from the world’s third-largest producer to the world’s fourth.  

Barbera said the western Texas region (around Lubbock and Lamesa), the epicenter of America’s cotton-growing belt, has  “ literally nothing” in fields that are simply desert sand.   He said fields that experienced drip irrigation were harvestable, but ones that were unable weren’t salvageable.  

“ If cotton is just not readily available from other sources, the  scarcity of supply from the US could support costs globally,   said Jon Devine, supply-chain economist designed for research Cotton Inc.

“ The marketplace has struggled to find the stability between the weakened demand environment and limited exportable supply in recent months. The conflict among these two influences makes it difficult to discern a clear direction with regard to prices and suggests continuing volatility, ”   Devine continued.  

Supporting prices are bullish bets by cash managers  turning positive initially since June as costs rally.

Louis Rose, director at Went up Commodity Group, said the particular USDA’s cut to US output is “ shocking” and comes at a time of the highest consumer inflation within decades.  

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