An important exception in this respect is synthetic fibers. Polyester prices have not exhibited the strength recently apparent in markets for agricultural commodities, metals, and petroleum. This divergence between synthetic fiber prices and other commodities is a recent development with important implications for cotton.
Cotton prices (A-Index, NE), lost about 40 percent of their value relative to the U.S. consumer price index (CPI) between the 1990s and 2000-05. Falling prices in real terms has long been the norm for unprocessed commodities, but cotton stands out. Between the 1990s and 2000-05, cotton prices declined about 20 percent relative to a large number of agricultural and non agricultural products.
In addition to wheat, corn, and soybeans, cotton prices fell 20 to 25 percent relative to spot prices for copper, gold, coal, bananas, and apparel. In other words, while all these products had prices that fell in inflation-adjusted terms, cotton prices fell twice as much in most cases. On the other hand, cotton prices fell only 15 percent relative to the prices of synthetic fibers, and fell by more than half relative to petroleum prices.
This pattern continued after 2005, and by 2007 the A-Index had fallen more than 40 percent in 20 years with respect to wheat, corn, and soybeans. In 2007, cotton prices were 60 percent lower relative to the U.S. CPI, 70 percent lower relative to petroleum than they were during the 1980s, and about 25 percent lower with respect to rice and synthetic fibers. The first 2 months of 2008 saw cotton again weaken compared with a number of commodities, including wheat, corn, soybeans, gold, rice, and petroleum.
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United States Department of Agriculture
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