A rally in cotton futures – attributed to the “Trump effect” – faded alongside gains in many other markets, as investors adjust to the landscape exposed by the surprise result to the US presidential elections.
Cotton futures for March stood 0.9% lower at 69.20 cents a pound in late deals in New York, falling back below a series of moving averages – and mirroring fallbacks in many other risk assets.
Indeed, the contract had reached a six-week high of 72.08 cents a pound earlier, taking to nearly 5% its gains since Donald Trump was early on Wednesday named US president-elect – making the fibre a particularly strong beneficiary of the post-election price surge.
In fact, cotton prices typically see seasonal weakness in November, Keith Brown, at Georgia-based broker at Keith Brown & Co, said.
The earlier rally, “at a time when it should be going down”, was down to a twin boost of both relief and fear.
Some of the buying had been motivated by concerns over that Mr Trump, who during his election campaign railed against free trade agreements such as Nafta, would usher in trade wars, with investors stepping in to secure cotton supplies.
“There is a lot of anticipatory buying on tariff [worries],” said Mr Brown, adding that yuan devaluation had played a role too, with China’s buyers stepping in for fear their currency may depreciate further.
“But there is nothing to fear,” Mr Brown added, saying that the “attitude of pessimism” which had initially been widespread after Mr Trump’s election had now shifted towards “one of optimism”.
“The US consumers are positive and there is an upheaval for good,” he said.
The cotton price rally also follows data on Thursday showing an increase in US cotton exports last week, to a total of 181,000 running bales.
“Sales again exceeded the weekly pace required to match the US Department of Agriculture’s export target” of 12.0m bales, said Louis Rose at the Rose Report, although noting that actual shipments were notably lower, at 151,000 running bales.
(Source – http://www.agrimoney.com/news/cotton-rally-on-trump-effect-fizzles-out–10151.html)