US Drought Pushes Cotton Prices to Rise

Cotton prices rose to their highest in a decade on Monday, 21 Mar 22 due to the recent drought in the central US. The cotton price was $1.3171 per pound (about 453 grams) on the key US futures contract up 7% from the previous day and almost 50% up from mid-September, the highest since July 2011. In early January rainfall was low in the northwest part of Texas -- which produces about 40 per cent of all US cotton production.

Cotton gets planted from March to June, so there is a lot of uncertainty regarding this year’s crop. This pattern is similar to weather during 2011, drought pushed cotton price rose as high as $2.27 per pound.

This drought is hitting a market that was already stretched due to increased demand for cotton textiles, linked to the pandemic and to spending more time at home. In addition, China, by far the world’s largest producer and importer, has accelerated its demand. Another phenomenon is the soaring price of pesticides, often widely used in cotton growing and petroleum derivatives, whose prices have soared.

High cotton prices were expected to lead to a marked increase in dedicated acreage in the United States, but the cost of pesticides should limit this growth. According to experts, the dynamics are similar to a lot of other commodities.