Home Cotton Global cotton prices forecasted to fall as supply hits peak

Global cotton prices forecasted to fall as supply hits peak

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Global cotton prices expected to fall as supply, stocks increase

Cotton prices are expected to remain weak in the 2019/20 and 2020/21 seasons as supplies of cotton outpace the demand and surpluses of cotton grow, concluded a report in Textile Outlook International from the global business information company Textiles Intelligence.

The report said that the average price of cotton had been falling since the beginning of 2018/19, and in 2019/20 it forecasted it to fall further to only 76 US cents/lb which would be 11 US cents/lb, lower than the average for 2018/19.

The report found that one major factor affecting the price of cotton was the weak demand caused by uncertainty arising from the US-China trade war. It said that until relations between the two countries improve, demand for cotton would remain suppressed and so would cotton price, unless there were major revisions to crop estimates or there were signs of greater strength in the global economy.

The report further said that the continued weakness in cotton prices had been reinforced by an increase in the size of the global stockpile which reversed recent declines. “Indeed, surpluses are growing in the main producing nations, and stock levels at the end of the 2019/20 season (July 31, 2020) are expected to be 1.3% higher than they were at the beginning (August 1, 2019),” it added.

However, the report said that the global consumption of cotton was expected to rise in the 2019/20 season as Chinese demand stabilises. Furthermore, it said that there was also a rise in global cotton production expected during 2019/20 as yields in India rebounded and plantings increased in the USA. As a result, global cotton production would exceed demand, stocks would rise and this would put downward pressure on the cotton price, it added.

It said that this pressure on prices would continue into 2020/21 as demand was forecasted to remain weak, while yields were expected to improve as a consequence of better weather conditions. The global cotton crop in 2020/21 had been forecasted to reach its second highest level ever, it concluded.

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