Cotton prices have surprisingly fallen in the last week in New York whereas also dropping on domestic markets in China, India and Pakistan. US futures have been depressed by a decline of commodity prices and renewed pessimism over ongoing trade negotiations with China. Cotton inventories could also be larger on domestic markets than earlier expected.
Cotton prices have significantly fallen in the last week in New York, in line with a drop of commodity prices on international markets.
A strong dollar and a sharp decline of crude oil prices have depressed demand for raw materials.
US shale gas production is now sharply increasing, therefore weighing over crude futures. The benchmark Brent indicator has fallen below the symbolic level of 70$ per barrel.
In New York, the key contract July 19 has lost more than 2 cents over the week, ending down 2.6% from previous Friday.
Far from reaching 80 cents
Prices were expected to further climb to 80 cents per lb. They have actually dropped to 75.7 cents.
US export sales have been disappointing in the latest weekly report from the USDA.
Large cotton inventories would actually still be held in consigned warehouses in different importing countries where demand for foreign cotton is lower than expected.
In Bangladesh especially, several spinners are apparently confronted with financial difficulties and yarn production would be lower than expected.
In Pakistan, the benchmark indicator has begun declining in rupee terms whereas in India, the benchmark Shankar 6 was also dropping in the meantime.
In China, the start of official sales from state reserves as of May 5th has resulted in a slight decline of domestic market prices which had risen in the previous weeks, by contrast.
Waiting for USDA data
Prices could further fall when the US Department of Agriculture will release its monthly update on next Friday.
Cotton output should rebound in the coming season, after the recent recovery of prices has boosted sown areas in largest producing countries.
Over the short term however, the last crop has been nearly exhausted and this should support prices until next September.
Source: Emergingtextiles
