Home / Knowledge / News / Textiles / Cotton's long term price outlook remains very positive
Cotton's long term price outlook remains very positive
15
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: American Apparel

Apparel/Garments | On 25th Feb 2017

Gildan to make some American Apparel products outside US

Gildan Activewear, which recently acquired US fashion brand American...

Courtesy: Kolon Sport

Apparel/Garments | On 25th Feb 2017

Kolon Sport to set up JV with ANTA for Chinese market

Kolon Sport, an outdoor gear and clothing brand of Korea based Kolon...

Designer Karishma Jumani with Niraj Jawanjal, founder and director of IIFW. Courtesy: IIFW

Textiles | On 25th Feb 2017

IIFW to bring together premium lingerie brands

India Intimate fashion Week (IIFW), dedicated to showcasing the...

Interviews View All

Giovanni Pizzamiglio, Paolo Crespi & Riccardo Robustelli
Epson, For.Tex & F.lli Robustelli

‘The percentage share of printing in the global textile market is pretty...

Jim Desai
Blaiva Fabricaa

Fashion industry likely to remain labour-intensive in coming years

Md Hanifur Rahman
Aman Group

The level of understanding the job role and organisational requirements...

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Paolo Ocleppo
Sandvik Hyperion

Paolo Ocleppo, Rotary Cutting Segment manager, Sandvik Hyperion discusses...

Steve Cole
Xerium Technologies

Steve Cole of Xerium Technologies discusses the industry. Xerium is the...

Wendell Rodricks
Wendell Rodricks

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

Igor Chapurin
Chapurin

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

Jay Ramrakhiani
Occasions Elegance Wear

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

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
February 2017

February 2017

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

SUBSCRIBE


Browse Our Archives

GO


eNEWS
Insights
Subscribe today and get the latest News update in your mail box.
Advanced Search