* Little impact seen on crop if rains let up in 2 days
NEW YORK, Aug 29 (Reuters) – U.S. cotton prices surged on Wednesday ahead of reports of what harm, if any, tropical storm Isaac did to the crop along U.S. Gulf Coast.
The storm made landfall late on Tuesday and as they waited for news, investors and traders bought up futures contracts for the fiber.
The benchmark December cotton contract on ICE Futures U.S. settled up 1.03 cents, or 1.4 percent, to settle at 76.65 cents per lb.
“We don’t know as yet what the storm will do to cotton in the delta,” said Keith Brown, president of commodity firm Keith Brown and Co. in Moultrie, Georgia.
“In the good old days, cotton would have been limit up, but with the huge supply in the market these days, these things are not as impactful as they used to be.”
Hurricane Isaac lashed southern Louisiana with high winds and heavy rains, and bore down on New Orleans, seven years to the day after Hurricane Katrina devastated the city.
While the estimates are early and likely to rise, Isaac, which reverted to the status of a tropical storm after making landfall, appears to be a much less damaging event than 2005’s Hurricane Katrina — the larger and more powerful cyclone that hit the same region.
Grain export facilities on the Louisiana Gulf were shuttered as the storm came ashore near the mouth of the Mississippi River, a major shipping outlet through which almost two-thirds of U.S. grain shipments flow every year.
U.S. cotton’s December contract jumped 1.2 percent on Monday on worries about the potential harm Isaac could cause to cotton crops in Alabama and Mississippi — two important states in the U.S. cotton belt.
Donald Keeney, a senior agricultural meteorologist with the Cropcast weather service — widely followed by ag traders for its global forecasts — predicted there will be some wind and flooding damage to the cotton areas mainly in northern Louisiana and southeastern Arkansas.
The effects further north, in northeastern Arkansas, northwestern Mississippi, and western Tennessee will likely be quality declines on the open boll cotton, rather than output, he told the Thomson Reuters Global Ags forum.
A cotton broker concurred with that view.
“If we had another storm there would be permanent damage, but rain for two days is not as devastating,” he said, adding that sunshine could help dry out crops.
Farmers in the U.S. Mid-South and South East, used to heavy storms during the hurricane season from June to November, may have sped up harvesting of more mature crops ahead of the storm.
Fundamentally, the U.S. cotton market is well supplied, with total output expected to grow 14 percent to over 17 million bales in the marketing year to July 2012.
Traders say the global surplus in the textile market is also expected to hit record levels.
While the supply situation is comfortable, investors have struggled with conflicting market signals of late.
Some see potential for supply scares if weak monsoon rains curb output in key cotton grower India, forcing the government to restrict exports.
Hedge funds and other speculative investors doubled the size of their net long position in U.S. cotton to 12,333 lots in the week to Aug. 21, data from the Commodity Futures Trade Commission showed.
That is the most bullish position for hedge funds in cotton since February, and a dramatic turnaround from a net short just three weeks ago that contrasts with the weak supply-and-demand fundamentals. (Reporting by Barani Krishnan and Josephine Mason; Editing by Bob Burgdorfer)