Cotton fiber prices have clearly rebounded on the international market therefore triggering a need for replenishing stocks as textile production is also recovering at the same time. New York is back to a 3-month high and cotton prices are further rallying in India, whatever the rise of the rupee.
Cotton futures have continued rising in the last week in New York, therefore confirming the new upward trend of the international market.
The nearby contract has gained 1.08 cent per lb or 1.4%, having increased by 3.6 cents in four weeks, or 4.9%.
The same May contract had reached a low at 71.11 cents on Feb 12th before jumping by 5.47 cents or 7.7% until last Friday.
At 76.58 cents at the end of the week, May has actually returned back to a 3-month high.
Disappointing production…
Market fundamentals are not supporting such a cotton rally, with the US Department of Agriculture (USDA) repeatedly forecasting higher stocks at the end of the season.
On the other hand, cotton production is clearly disappointing in key countries, like India or Pakistan, whereas China needs importing large quantities after its state reserves have significantly dropped.
The level of China’s demand is the key factor on the market, as already observed in the past.
With trade negotiations between Beijing and Washington apparently far from being completed, China maintains its additional tariffs on US cotton imports.
Chinese buyers are apparently shifting to Brazil, Australia and primarily India.
…rebounding demand
Cotton prices are therefore surging in India, but mostly due to the poor cotton crop this year, as a result of drought conditions in key producing states.
With the rupee now rebounding, India’s cotton fiber and yarn exports could be negatively affected in the coming period and demand for cotton could therefore drop and pressure prices.
On the other hand, the current rebound of prices may have triggered a need for replenishing stocks.
After textile production and sales have been very depressed on the international market, the recovery of New York could also mean a rebound of inventory levels with fiber and yarn prices rallying as a result.
Source: Emergingtextiles
