Cotton prices are headed towards historic highs. Reasons include overall trade volatility, a lower production forecast and China’s uncertain policies. Global cotton market was volatile over the past month, with values for most benchmark prices moving higher in the second half of May.

Values for the July New York futures contracts surged to 95 cents a pound of late from levels near 84 cents a pound a month ago. Values for the December New York futures contracts rose more sharply than those for July–to 93 cents a pound from 80 cents in early May. The A Index, an average of global spot prices, also climbed. The largest changes to harvest expectations have been for China, Pakistan, Australia and Brazil.

Ending stocks outside China are expected to increase in 2018-19, adding to the record volume estimated for 2017-18. This volume will serve as a buffer against rising Chinese import demand. The actual volume of stocks available for export to China, as well as the size of the increase in Chinese imports, can be expected to determine price levels in 2018-19 and beyond. Synthetic fiber prices have also spiked recently, but eased off a bit in May. Gasoline prices helped feed the rise in synthetics.