Cotton prices are reaching record-highs

Cotton prices are reaching record-highs

Cotton prices are expected to continue to rise despite experiencing huge volatility on US exchanges at the end of last week, according to Rabobank.

Following record gains on Thursday and early Friday and a high not seen since the US Civil War, prices plummeted by the maximum amount permitted under exchange rules later in the day.

But Rabobank believes that continuing demand from China, the world’s biggest importer of cotton, coupled with low stock levels at leading exporter the US, will lead to continuing price rises in the near future.

However, the upward curve may be interrupted by further dips thanks to continued concerns over global economic growth and the instability of foreign exchange markets.

Calling the upward trend in pricing “more sustainable” than other recent increases, Rabobank said price increases were necessary to encourage farmers in the US and Brazil to plant more cotton and ease the current shortages.

And demand is likely to be boosted further by shortages in flood-hit Pakistan, as well as in China, where this year’s crop levels have been lower than expected.

Rising prices are sure to mean increased prices for clothing in major markets like the US and the UK, particularly in the low-margin, budget clothing sector, which is more exposed to such price volatility.