A combination of factors has muddied the waters of the global cotton market, at least in the short term, says the ICAC

A combination of factors has muddied the waters of the global cotton market, at least in the short term, says the ICAC

A combination of factors has muddied the waters of the global cotton market, at least in the short term, new figures show.

While cotton demand is up, with consumption projected to increase 5% in 2018/19, murky trade policies have dragged prices down from a season-high of 102 cents per pound. Uncertainty in trade policies may have broad effects, disrupting stability in global trade and economic growth, a driver of consumer demand, according to the latest update from the International Cotton Advisory Council (ICAC).

Cotton demand is up, particularly in Asia and South Asia, but drought conditions in the west Texas region of the United States and the potential of new tariffs on cotton are serious concerns — and one of the reasons that prices have dropped from the season-high.

Relations between the world's largest exporter, the United States, and the world's largest consumer, China, have been tense of late as the so-called "trade war" between the two countries continues to escalate, with China announcing a 25% tariff on uncombed US cotton that was scheduled to go into effect on 6 July. 

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 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% to 19.3m tonnes, following two seasons of continual decreases in global stocks.

Meanwhile, consumption in 2018/19 is projected to grow 5% to 27.4m tonnes with production projected at 25.9m tonnes. With consumption expected to outpace production in 2018/19, global stocks are expected to decrease to 17.8m tonnes.