Cotton prices edged down steadily in September, falling to their lowest level in six months.
According to data from the U.S. Department of Agriculture (USDA), the seven-market U.S. average cotton spot price declined by more than $0.04 per pound between Aug. 29 and Oct. 2, dropping 2.4% to $0.5846.
Several factors contributed to the decline. For one, the USDA made a slight upward revision to its U.S. crop forecast for 2015/2016, which was expected by many in the trade after a sharp cut in the estimate last month.
The devaluation of the Chinese currency in August and weak demand for Chinese cotton reserves also put downward pressure on prices. Only 6 percent of the 1 million tons offered for sale in the Chinese auction this summer were purchased.
Current USDA estimates put 2015/2016 global cotton production at 108.7 million bales, down from 118.9 million in the prior year. This includes a drop in Chinese production of 4 million bales. Global mill-use is estimated to increase from 111.5 million bales to 113.4 million bales, with most of the increase in demand coming from India. The ending stock estimate for the current season is now 106.3 million, a drop from 2014/2015’s 110.9 bales, but a 1 million bale increase over last month’s estimate.
Although the decline in prices could stimulate demand for cotton fiber, continued economic weakness in China and other key markets will most likely temper that demand.
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