Cotton prices have begun recovering in the seven past days after sharply falling in the previous weeks. Although long-term data are depressing market prices with a much larger global output expected in the next season, short-term factors should boost cotton to higher levels when US cotton supplies will have dried up in the coming weeks.
Cotton prices have begun last week recovering and could now further rise.
In New York, the nearby contract has gained 2.4 cents per lb or 3.6%. The December contract has only risen 1.8% in the meantime.
Short-term factors could actually boost prices to higher levels after they have sharply fallen over bearish data for the next season.
Although global production is expected significantly rising in 2019-20, the market continues lacking cotton in the current season.
US exports have surged in the latest weekly report from the USDA, however available supplies could now dry up until the start of the new season in August-September.
Demand for US cotton is surging from India where the latest crop has been digested, boosting domestic prices to higher levels than elsewhere in dollar terms.
Demand is also very strong from Vietnam and Bangladesh where cotton production is negligible and domestic spinners will have to shift to other origins in the coming weeks.
Pakistan is also lacking cotton and the new crop will not reach market before mid-July.
In China, cotton prices are not expected rebounding by contrast, as large available quantities are still offered to spinners.
Official sales from state reserves have recently resumed whereas import quotas have been allocated offering much lower import tariffs to spinners.
By contrast, additional tariffs of 25% on US cotton have been maintained by Chinese authorities with tariffs therefore ranging from 26% to 65% since last July.
As a consequence, Chinese demand for US cotton has sharply fallen in the first quarter this year, as reflected by below tables covering Chinese cotton imports in January-March over the 2014-2019 period.
Chinese importers have clearly shifted to Brazil and Australia with India also benefiting from the US-China trade war.
Imports could also surge from Western Africa where demand is rising from Indian importers.
Source: Emergingtextiles
