Trade tensions and higher stocks are adding uncertainty to the global cotton market, according to a new update – with prices falling to a season-low due to a projected increase in global stocks.
The June edition of ‘Cotton This Month’ from the International Cotton Advisory Council (ICAC) expresses some hope that American and Chinese representatives might be able to de-escalate the US-China trade war later this month when they’re together at the G20 Summit in Osaka, Japan.
“However, the US government recently announced it will provide $16bn in additional support to its farmers, potentially indicating plans for a prolonged standoff,” the inter-governmental body concedes.
The tariffs have also had an impact on prices, with the Cotlook A Index hitting a season-low of 76 cents per pound in mid-May.
Although global consumption is expected to rise by 1% in 2019/20, production is expected to jump 7% – with the resulting increase in global stocks exerting further downward pressure on prices.
In its last monthly update, ICAC noted that while China is projected to be the world’s largest consumer at 8.45m tonnes in 2018/19, the US is expected to remain the world’s largest exporter, despite ongoing Chinese tariffs.
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By GlobalDataThe group has also forecast that consumption of the raw material is expected to set an all-time high in 2019/20, reaching 27.3m tonnes. But with total production expected to reach 27.6m tonnes, this would leave 17.7m tonnes in the world’s warehouses at the end of next season.
