Cotton Prices Rise 4 Percent in April

After falling by almost 2 percent in March, cotton prices reversed direction and rose by more than 4 percent in April, according to the latest data from the Agriculture Department.

The seven-market U.S. average cotton spot price increase by 2.65 cents per pound, to $0.644.

However, it is unclear why prices rose, since estimates for supply and demand were nearly unchanged in the month, which means the increase might be short-lived.

World cotton stocks are projected to increase 8.2% to 110.1 million bales in the current season. Global cotton mill use for 2014-2015, on the other hand, is forecast to rise by less than 2 percent above last year, to 111 million bales. Although China has started to release large portions of the cotton reserves it stockpiled during the buying program in place for several years to support prices, the expected increase in demand for cotton by Chinese mills has not yet materialized. The country is expected to import 7.3 million bales of cotton in the current crop year, a little over half last-year’s level.

India, the world’s second largest exporter after the U.S., is expected to tie China in cotton production this season. India’s acreage plans for 2015/2016 will have significant impact on global production and prices given its limited warehousing capabilities.

The USDA estimates that, in response to continuing low prices, global consumption will exceed production in the 2015/2016 season, leading to a reduction in global stocks for the first time in six years, though stocks will still remain near historic highs. Most of the stock drawdown will occur in China.

cotton


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