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Saturation in cotton markets will burst price bubble – experts
27 Mar '10
2 min read
Cotton price has been rising since the time of the arrivals of the new crop season. This has happened mainly due to two main reasons; there were expectations of a decline in cotton output and second, demand picked up towards end of 2009.
Cotton crop failure in the current season is a worldwide problem. China's cotton harvest is expected to be lower than the average level in the current year, along with which the US cotton crop was also forecasted to reduce.
All these factors created a panic, since the US is a major exporter of cotton. With the recovery in global economies, demand for textiles and apparels also started growing towards the end of 2009, this led to an increase in demand for raw cotton.
All these factors combined together, to create a panic like situation in the minds of cotton processing enterprises, who started purchasing cotton to build up their inventories, as their were clear portends that prices would shoot up in due course of time.
Experts are of the opinion that, it would be irrational for cotton prices to rise beyond current levels, despite the imbalance between supply and demand in downstream market and expect the price bubble to burst, once the market gets saturated.
Cotton crop failure in the current season is a worldwide problem. China's cotton harvest is expected to be lower than the average level in the current year, along with which the US cotton crop was also forecasted to reduce.
All these factors created a panic, since the US is a major exporter of cotton. With the recovery in global economies, demand for textiles and apparels also started growing towards the end of 2009, this led to an increase in demand for raw cotton.
All these factors combined together, to create a panic like situation in the minds of cotton processing enterprises, who started purchasing cotton to build up their inventories, as their were clear portends that prices would shoot up in due course of time.
Experts are of the opinion that, it would be irrational for cotton prices to rise beyond current levels, despite the imbalance between supply and demand in downstream market and expect the price bubble to burst, once the market gets saturated.
Fibre2fashion News Desk - India
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