Uncertain trade policies may disrupt global cotton market

06 Jul '18

2 min read

Trade relations between the US—the world’s largest cotton exporter—and China—the world’s largest cotton consumer—are tense. China has announced a 25 per cent tariff on uncombed US cotton that is scheduled to go into effect on July 6, 2018. The uncertain trade policies along with tight markets create uncertainty in the short-term in global cotton markets.

Cotton demand is up, especially in Asia and South Asia, but drought conditions in the West Texas region of the US and the potential of new tariffs on cotton are serious concerns—and one of the reasons that prices have dropped from a season-high of 102 cents per pound, according to the July 2018 edition of Cotton This Month, released by the International Cotton Advisory Committee (ICAC).

However, the current price for cotton is still higher than the season average to date—87 cents per pound—and considerably higher than the 20-year historical average of 73 cents per pound. The ICAC price forecast for 2017-18 is 86 cents per pound. For 2018-19, the ICAC secretariat is projecting the average price to end between 66 and 107 cents per pound.

While both production and consumption are projected to increase in 2017-18, higher production will result in world stocks increasing 3 per cent to 19.3 million tonnes, following two seasons of continual decreases in global stocks. Consumption in 2018-19 is projected to grow 5 per cent to 27.4 million tonnes with production projected at 25.9 million tonnes. With consumption expected to outpace production in 2018-19, global stocks are expected to decrease to 17.8 million tonnes. (RKS)

Fibre2Fashion News Desk – India

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