Home / Knowledge / News / Textiles / Cotton market facing many uncertainties
Cotton market facing many uncertainties
17
Dec '11
However, the problem with this Chinese support is that only a part of it has been directed at the international market, with the US being the main beneficiary. Most other origins, such as India, CIS, Brazil, Australia and the various African growths, have only seen a limited amount of business from China thus far.

This may change at some point in the future, because at least from a statistical point of view it seems that China will have to import quite a bit of cotton next year. According to the USDA, China produces 33.5 million bales this season, while mills use 45 million bales. That amounts to a shortfall of 11.5 million bales. Add to that the 7.2 million, which the Reserve has lifted off its domestic market so far, and the shortfall rises to 18.7 million bales. Therefore, unless the Reserve makes these bales available again later in the season, the difference has to be made up by imports.

Among all the bearish hype surrounding the latest USDA report, it seemed to have gone largely unnoticed that the USDA has increased Chinese imports by 1.5 million bales to 15.5 million bales, which, if it materializes, would be supportive to the market.

The big question is of course the timing of these potential imports. Many of the non-US origins that are currently sitting on their crops are becoming increasingly nervous and are either lowering their offering prices or are seeking protection in the futures market. From a technical point of view the futures market is sending rather mixed signals. On the one hand there is this very pronounced downtrend, which has seen prices drop from a high of 227 cents in early March to a current price in the mid-80s.

On the other hand we have seen an inverted spot month throughout this entire decline, which signals tightness in the cash market. Indeed, the US cash basis has remained relatively firm as shippers try to lock up available supplies against their large unshipped book of commitments, while futures are being pressured by the need to hedge mainly non-US cotton that has yet to be sold.

So where do we go from here? Markets don't like uncertainty and right now there is plenty of that, both in the global financial markets and in the cotton market. With deflationary forces once again taking the lead in this ongoing dance between deflation and inflation, when will central banks come to the rescue with another round of money printing?

The ECB doesn't seem to be in any hurry, as Germany is trying to put the brakes on more money printing, although sooner or later there will probably be no other alternative! The same goes for the Fed, who has taken its foot off the pedal over the last six months, but who will likely resume its money printing as cracks in the system start to appear.

Among the many uncertainties the cotton market is facing, Chinese import quotas are probably at the forefront. Without sizeable imports from China, prices of non-US origins are likely to drop further, as the holders of these unsold crops don't have nerves nor the financial means to sit on their cotton for too long. In the short-term we may therefore see lower prices, but it may not be a good idea to get too extended on the short side.

In the longer-term we see strong chart support, the potential for Chinese imports and lower plantings next season acting in support of the market, although a return to a bull market seems unlikely anytime soon.


Must ReadView All

Apparel/Garments | On 22nd Sep 2017

Govt announces new duty drawback rates for garments

The Government of India has today announced the new duty drawback...

Courtesy: ITMA

Textiles | On 22nd Sep 2017

ITMA 2019 to focus on smart garment technologies

ITMA 2019, the world's largest textile and garment technology...

Apparel/Garments | On 22nd Sep 2017

New US FTC rule for RN used on textile product labels

The US Federal Trade Commission recently streamlined requirements...

Interviews View All

Amrit Sethia
SOIE

‘The intimatewear category in India is slowly becoming trend-sensitive.’

Subhashini Srinivasan
The S Studio

Ethnicwear market will see an upward trend if uniqueness and quality are...

Manuj Terapanthi
Texaura

Transparent supply chain and fair trade will boost sustainable market

Iago Castro Asensio
RCfil Distribuciones S.L.

Iago Castro Asensio, International Business Manager of RCfil...

Kai Poehler
Voith Paper GmbH & Co. KG

The glass mat industry is growing by five to eight per cent annually. Kai...

Kerem Durdag
Biovation II LLC

Kerem Durdag, CEO, Biovation II LLC, provides an insight into future...

Jay Ramrakhiani
Occasions Elegance Wear

It is believed that by early 19th century, Varanasi weavers had moved away ...

Igor Chapurin
Chapurin

"Now we can see the Russian trend in international fashion. And Russian...

Prathyusha Garimella
Prathyusha Garimella

Hyderabad-based designer <b>Prathyusha Garimella</b> is known for blending ...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

September 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
74.5%
No
12.8%
Skip
12.8%

Total Votes: 47

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
61.7%
No
25.5%
Skip
12.8%

Total Votes: 47

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
87.2%
No
6.4%
Skip
6.4%

Total Votes: 47

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
70.2%
No
10.6%
Skip
19.1%

Total Votes: 47


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search