Cotton climbs to six-week high as storm approaches cotton belt

Thu Oct 3, 2013 5:35pm EDT

* Traders frustrated at missing USDA export sales data

* Tropical Storm Karen on track to hit some key cotton-growing states

* Traders worry rains will further delay crop

By Marina Lopes

NEW YORK, Oct 3 (Reuters) - New York cotton prices climbed to a six-week high on Thursday as traders monitored a tropical storm brewing in the Gulf of Mexico, threatening crops in major cotton-growing U.S. states.

The buying helped prices recover from the previous day's losses caused by uncertainty over the U.S. government shutdown.

The most-active December cotton contract on ICE Futures U.S. settled up 0.57 cent (0.44 cent?), or 0.65 0.5 percent, at 87.44 cents a lb. Prices hit 87.78 cents, their highest level since Aug. 21.

Fiber outperformed the broader commodity market, with the Thomson Reuters-Jefferies CRB index, a closely watched indicator for commodities, down 0.31 percent on the day.

U.S. equities fell and the dollar hit an eight-month low, as investors worried about the U.S. government shutdown.

Physical traders bought fiber bracing for Tropical Storm Karen which has formed in the southeastern Gulf of Mexico, to sweep through Alabama, Georgia, South Carolina and North Carolina, some big cotton growing states.

Heavy rains and wind could damage crops, which have already been delayed in Texas, the country's largest growing state.

"Prices have recovered off the lows and there is some anticipation of the lateness of the crop," said Mike Quinn, president of the Carolinas Cotton Growers Co-operative.

He represents farmers in Virginia, Georgia, North and South Carolina.

"There is still some pretty good demand out there. I think the specs are continuing to hold long positions," he added.

In the week to Sept. 24, data showed speculative investors were holding a net long position in fibers, although it is their smallest long since January this year.

Ferocious speculative buying has propelled cotton's 12 percent rise this year. The U.S. Commodity Futures Trading Commission will publish data for the week to Oct. 1 on Friday.

Traders had to do without the weekly cotton export sales report, an key indicator of demand for U.S. cotton from the U.S. Department of Agriculture and the fist major statistic missing as U.S. government closure entered its third day.

"Today we got our first little taste of it with our Thursday export reports not being available. I do think that adds uncertainty to the market," said Lou Barbera, cotton dealer at ICAP Cotton in New York.

On Wednesday evening, IntercontinentalExchange Inc announced it would employ emergency measures to access premiums and discounts for its October contract after the USDA stopped publishing those numbers.

The move will have little impact on the contract which only has one lot of open interest left with four trading days before it expires.

But it gave traders a glimpse into potentially more serious complications that could affect the December contract, which represents the upcoming 2013/14 harvest, if there is a prolonged U.S. government shutdown. (Editing by Josephine Mason and David Gregorio)

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