Uncertainties surrounding the trade war between the US and China have pushed cotton prices down from a season-high last August to a low in July, new figures show.
The latest monthly update from the International Cotton Advisory Council (ICAC) notes that cotton prices on the Cotlook A Index have dropped from 99.5 cents per pound in August 2018 to 74 cents in July 2019.
The decline has largely been in line with the deteriorating trade environment, from the first increase in US import duties on products from China at the beginning of June last year, followed by higher import duties on more products, as well as counter duties by the Chinese.
After further escalation in early May, including an additional 25% tariff on US cotton imports from China – along with threats of punitive tariffs of up to 25% on the remaining $300bn worth of US imports from China – including all textiles, apparel and footwear – the tone appeared to have shifted back towards reconciliation as new trade talks got underway between the two sides.
This has now ramped up again after US President Trump yesterday (1 August) tweeted plans to impose “a small additional” 10% tariff on all remaining imports from China beginning 1 September.
For global mill-use, this is negative since it suggests that US apparel demand may suffer from higher sourcing costs.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe ICAC concedes that optimism for a surge in global cotton demand in 2019/20 is waning, especially as supply is rising.
Production in 2019/20 is expected to reach 27.2m tonnes (up 6% from the prior year), with consumption increasing at a slower 1.7% to 26.9m tonnes – meaning production will exceed consumption by about 300,000 tonnes.
As a result, global stocks should swell to 18 million tonnes. Those factors, combined with tepid expectations for global economic expansion, have dimmed the hopes for next season’s cotton demand,” the inter-governmental group says.
At 5.9m tonnes, China is expected to remain the world’s largest producer in 2019/20, topping India’s projected 5.75m tonnes. West Africa, meanwhile, is expected to see its production hit an all-time high of 1.3m tonnes.
