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A messy global cotton market

A combination of factors has muddied the waters of the global cotton market. Cotton demand is up, especially in Asia and South Asia but drought conditions in the West Texas region of the United States and the potential of new tariffs on cotton are serious concerns. Relations between the world’s largest exporter, the United States, and the world’s largest consumer, China, have been tense.

China has announced a 25 per cent tariff on uncombed US cotton that is scheduled to go into effect on July 6. While both production and consumption are projected to increase in 2017-18, higher production will result in world stocks increasing three per cent, to 19.3 million tons, following two seasons of continual decreases in global stocks. Consumption in 2018-19 is projected to grow five per cent with production projected at 25.9 million tons. With consumption expected to outpace production in 2018-19, global stocks are expected to decrease to 17.8 million tons.

Prices have dropped from a season-high of 102 cents per pound. However, current price of cotton is still higher than the season average of 87 cents per pound and considerably higher than the 20-year historical average of 73 cents per pound.

 
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