Growing global cotton demand and a tightening supply indicate that cotton could be entering a bull market and while Covid-19 remains a threat to the rally, it so far hasn’t stopped the market momentum.
One month into the 2021/22 season, cotton prices have been trending upward with the Cotlook A index season average at 101.34 cents per pound, according to the latest update from the International Cotton Advisory Committee (ICAC). Cotton prices are also high in China, with the CC Index averaging 126 cents/pound since the season began.
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ICAC adds the resurgent Covid virus remains a threat that could derail the market rally but the opening of economies and an increase in consumer demand that occurred when the vaccinations began spreading across the globe indicate that consumption does not appear to be slowing down.
Meanwhile, with demand exceeding production, ending stocks are expected to decline for the second year in a row to stand at 19.7m tonnes in 2021/22, 5% lower than the previous season.
World cotton production for the 2021/22 season has been revised to 24.9m tonnes, with the area under cotton also revised to 32.8m hectares.
As a result of these bullish factors, the Secretariat’s current price forecast of the season-average A index for 2021/22 ranges between 76 cents to 126 cents, with a midpoint at 98.20 cents per pound.
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By GlobalDataFormed in 1939, the ICAC is an association of cotton producing, consuming and trading countries. It acts as a catalyst for change by helping member countries maintain a healthy world cotton economy; provides transparency to the world cotton market by serving as a clearinghouse for technical information on cotton production; and serves as a forum for discussing cotton issues of international significance.
The ICAC recently announced it has partnered with the International Trade Centre and is working to double the yields of at least 50,000 smallholder cotton farmers in Zambia by January 2024.
