Global cotton prices might be influenced by more than traditional market fundamentals, says ICAC

trisha-downing-pyud8ZaVq4I-unsplash-scaled.jpg

The International Cotton Advisory Committee (ICAC) said in its latest report that it expects global cotton production for 2020/21 at an estimated 24.6 million tonnes, led by India. Global consumption is estimated at 25 million tonnes, led by demand from China.

Global trade, it said, was estimated at 9.8 million tonnes.

The ICAC said these fundamentals supported an increase in prices, but there were other factors such as continuing trade disputes between major players and U.S. restrictions on cotton from Xinjiang could put stress on global supply chains.

“Today the industry finds itself in that very situation. If, as expected, global cotton production in 2020/21 (estimated at 24.6 million tonnes) is unable to keep pace with global consumption (estimated at 25 million tonnes) and worldwide trade remains healthy (estimated at 9.8 million tonnes), that combination of factors normally would be expected to drive an increase in price,” the ICAC said.

It said ongoing trade tensions between the USA and China likely will continue to have an impact on prices, and the recently announced US restriction on cotton from Xinjiang — which produces about 90% of China’s cotton lint each year — complicates the outlook as well.

“If fully enforced, the restriction would place a very difficult burden of proof on companies throughout the long and complex cotton supply chain.”

In terms of prices, the ICAC’s current projection for the year-end 2019/20 average of the A Index has been revised to 80 cents per pound this month. The price projection for the year-end 2020/21 average of the A Index is 89.7 cents per pound this month. 

Leave a Reply

Your email address will not be published. Required fields are marked *