Cotton prices were in free fall at the start of the new week on the international market, as a result of latest threats by president Trump to apply additional tariffs on Mexican products. Although cotton prices should now firm up as the latest crop is drying up, political disruption may depress the cotton market at any time, negatively affecting anticipations of the global supply chain.
Cotton futures have today tumbled in China, in line with a sharp decline of financial and commodity markets after President Trump has threatened to impose additional tariffs on Mexican imports.
In Zhengzhou, the nearby contract has lost 375 yuan per metric ton in a single day, or 2.8%.
Electronic trading of US futures market was also in sharp decline on Monday morning with the July contract back to 67.26 cents and December even falling to 66.30 cents per lb.
The New York’s market had previously been relatively firm in New York, over a high level of US export sales in the latest weekly report by the USDA.
More important, this season’s crop will soon have been fully sold which should support prices until the new harvest will reach the market.
Price forecasting models are however increasingly disrupted by political factors which are impossible to anticipate.
A very high price volatility should result of such rising uncertainties.
In China, cotton prices have begun more significantly falling this Monday on the physical market, after previously stabilizing.
The possibility of Chinese sanctions on US companies may be expected deteriorating anticipations of buyers.
The Chinese government could ban imports of US agriculture products, which would support domestic cotton prices.
Additional import quotas which had been allocated to spinners a few weeks ago would already have been fully used.
In the meantime, they have boosted demand for foreign cotton and resulted in a fall of domestic cotton prices.
With official sales resuming as of May 5th from state reserves, demand has shifted to domestic products amid falling prices.
In India, cotton prices have stayed relatively firm in the past week, after previously rebounding. Latest data confirm that domestic production has sharply fallen this season.
Compared with other domestic markets, Indian cotton has increasingly risen in the past months in dollar terms.
In Pakistan, cotton prices are being supported by the lack of supply and the need to buy foreign fibers while the domestic currency is further falling.
Source: Emergingtextiles
