The average price of US cotton declined by 10% over the last six months (August to January), compared to the previous six-month average, driven by the effects of the US-China trade war and higher global supply.
The global 2019/20 cotton production is projected at 120.5 million bales, an increase of 2% y-o-y, mainly as a result of a larger Indian crop.
However, the US 2019/20 cotton output continues to be revised down. Whereas the production was estimated at 21.9m bales in September 2019, the latest USDA forecast from January puts the crop at 20.1m bales, still an increase of 9% y-o-y. Although the area cultivated to cotton in the US increased by 16% from the previous season, to 4.78m hectares, yields are anticipated to fall by 5% y-o-y due to drought conditions in southern parts of the country.
On January 15, the US and China signed the new phase-one trade deal. As part of the deal, the US will cut import taxes on Chinese products whereas China has committed to increasing its purchases of US products. This is expected to stimulate new demand for US cotton and support the US cotton prices going forward.
From economical to political, all the factors impacting the cotton market have been analysed to provide a market outlook for the next six months. Mintec’s market outlooks (schedule) provide insights on factors shaping the market dynamics of various commodities, providing the opportunity for market participants to stay ahead of factors that will impact procurement decisions.