Cotton Prices Fall Down In 2019/20

In the last month, ICE futures closed to 65-69 cents after breaking into 63 cents, and the A index dropped from 76-78 cents to 74 cents. The price of cotton in China is relatively stable. At present, it maintains at 14200 yuan / ton, while cotton prices in India have dropped to 82 cents, while cotton prices in Pakistan have dropped from 71 cents to 64 cents. One reason is that the rupee exchange rate has fallen by 5%, and the rupee exchange rate has fallen more than 10% since mid May.

For the upcoming 2019/20, there are several problems to be solved in the market, and the most important thing is the trade environment. After the meeting between the heads of state of China and the United States at the end of last month, the two sides stopped further tariffs, which is a good thing for global cotton consumption. The import demand for clothing in the United States will not be temporarily negatively affected by the added tariffs (China accounted for 42% of the total value of clothing imports in the United States). However, the prospects for trade negotiations are still unpredictable, and it is entirely possible for the United States to impose tariffs on Chinese clothing again. A year ago, the United States threatened to impose tariffs on Chinese clothing, which was later abolished. In May this year, it was mentioned again, and it was temporarily suspended at the end of June. The market must take precautions against this repeated practice in the United States.

Although the two sides have resumed trade negotiations, so far, China has not abolished tariffs on US cotton. In 2019/20, US cotton production is expected to reach 22 million packages, domestic consumption is only 3 million 100 thousand packages, and US cotton exports must reach an extremely high level so as to avoid the increase in the end of US cotton stocks. Now USDA expects us cotton stocks to increase by more than 30% at the end of this year. If US cotton export shipments are lower than expected this year, the increase in US cotton supply next year will bring more pressure to global cotton prices.

Besides the issue of Sino US trade, weather factors are also unfavorable to cotton price trend. At present, the new cotton growing in the United States is good, and the seasonal wind and rain situation in India has improved. The output of China's new cotton is also expected to be unchanged from last year.