Trade tensions and higher stocks add uncertainty to global cotton market

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Photo courtesy - Cargill

The world cotton market faces continued uncertainty due to the escalating US-China trade war, with prices under additional pressure due to a projected increase in global stocks, the International Cotton Advisory Committee (ICAC) said in its latest monthly report.

It said there is some hope that American and Chinese representatives might be able to de-escalate the conflict later this month when they’re together at the G20 Summit in Osaka, Japan.

“However, the US government recently announced it will provide $16 billion in additional support to its farmers, potentially indicating plans for a prolonged standoff.”

According to the ICAC, prices have suffered from the escalating tariffs, dropping to a season-low of 76 cents per pound on May 14. Although global consumption is expected to rise by 1%, production is expected to jump 7%, with the resulting increase in global stocks exerting further downward pressure on prices.

Key issues:

  • The US-China trade war continues to escalate, with increasing retaliatory tariffs on both sides.
  • There is an opportunity for de-escalation at the G20 Summit scheduled for late June, but both countries might be preparing for a protracted dispute.
  • The tariffs have had an impact on the A Index, which hit a season-low of 76 cents per pound in mid-May.
  • Production is projected to outpace consumption in 2019/20, exerting further downward pressure on prices.
Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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