Home / Knowledge / News / Textiles / Cotton's long term price outlook remains very positive
Cotton's long term price outlook remains very positive
Jul '08
The past two weeks have been very disappointing for the cotton bulls as New York has slipped from the upper 70's down to Friday's low near 72 cents. With new crop October futures now the nearby contract, near term supply based bearishness is the major fundamental factor facing the market. Too, even with the long term bullish price scenario very much in place, world crop prospects must deteriorate if the bullish price prospects are to surface.

While the world crop size is declining, as are world stocks, the available supply far exceeds market demand once price move above 72-75 cents. Likely, a 70-76 cent trading window has now been created. The window will be broken only with declining world crop conditions or an unexpected discovery of demand. We should best look to the supply side of the price equation if relief is to be expected.

USDA's July supply demand report appeared to be somewhat bullish as 2008-09 world production was lowered 1.4 million bales, down to 115 million bales, or five million less than the 2007-08 crop. More importantly, world ending stocks for the coming season were lowered to 53.2 million bales, down 900,000 bales from the June estimate. If this estimate materializes, world ending carryover would drop 8.1 million bales during the 2008-09 marketing year. Other potentially bullish indicators include the USDA estimate of a 700,000 bale reduction in foreign carryover and a one million bale decline in carryover located in the major exporting countries, excluding the U.S.

However, the USDA report estimates 2008-09 world demand at 126 million bales, or two million above the current 2007-08 season. While USDA estimates wolrd consumption is still growing, it is likely that world cotton demand is contracting and will slip as much as five million bales below the current USDA estimate of 126 million bales. World consumption for 2007-08, currently estimated at 124.3 million bales, will likely decline in the coming season as a result of numerous factors.

A slowing world growth, excessive yarn stocks, and consumer rationing of discretionary income between clothing will work to the detriment of cotton demand. Other bearish market concerns include excessive yarn carryover in China and that apparel exports from China fell in June 2008, the first month to month decline in over ten years. A very heavy hat on this market continues to be New York's certificated stocks. Now at 1.7 million bales, they could grow to 2 million.

The U.S. has returned to its familiar role as the world's supplier of last resort. Too, Texas has solidified, and very clearly, its position as the U.S.'s primary producer of high quality Upland cotton. (This does not discount that SJV is of superior quality, but its annual volume has become very limited.) With India surfacing as the preferred market of Chinese mills, the U.S is now challenged to locate new markets for U.S. cotton exports.

India offers Chinese mills a15 day shipping date from purchase to delivery. Recent U.S. performance in capturing an increasing share of the growing textile economies of Bangladesh and Vietnam have failed. These markets will have to be penetrated due to their potential as major textile economies.

Must ReadView All

Courtesy: Myntra

Apparel/Garments | On 3rd Dec 2016

Myntra to be EBITA positive by FY18: CEO Narayanan

Myntra is on track to achieve sustainable growth and be EBITA...

Courtesy: India ITME Society

Textiles | On 3rd Dec 2016

India ITME 2016 opens with over 1050 exhibitors

The India International Textile Machinery Exhibition (India ITME)...

Courtesy: Bruckner

Textiles | On 3rd Dec 2016

Indian textile companies opt for Brückner stenter lines

Indian textile firms Laxmipati Sarees, makers of polyester sarees and ...

Interviews View All

Akash Khetan
Narayan Tex Fab

I find it hard to find professionals in Surat

Amit Jain
Shingora Textiles Ltd

‘In terms of fabric, the fastest growing category for us is a blend of...

Sunil Kumar Sharma
Loknayak JPNSSSG Ltd

'The blend of cotton–linen yarn has high demand in the domestic and...

Eamonn Tighe
Nature Works LLC

Eamonn Tighe, Fibres and Nonwovens - Business Development Manager of...

Kerem Durdag
Biovation II LLC

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

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Pranav Mishra

Designers Pranav Mishra and Shyma Shetty’s Huemn is known for its...

Wendell Rodricks
Wendell Rodricks

"We should not compare India and the West. There are things we do that...

Silvia Venturini Fendi
Fendi s.r.l

"Yes, my confidence and positive attitude are my strengths and should be...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


Letter To Editor

(Max. 8000 char.)

Search Companies

December 2016

December 2016

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


Browse Our Archives


Advanced Search