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Cotton Price Forecast and Market Outlook

The A-Index cotton price will stay high in the short term, fluctuating around 84–88 cents per pound, but an increase in supply as the cotton season swings into gear will place downward pressure on the price by the end of the second quarter. On a global basis, the expected increase in supplies from the Northern Hemisphere will also create pressure for lower prices to finish 2017, while the availability of new harvest supplies from the Southern Hemisphere should arrive in the third quarter, dampening prices further. The cotton season has just begun, though, and weather will determine the extent of cotton production expansion.

On a regional basis, the Chinese cotton price should remain strong, around 104 cents per pound, with the release of cotton stocks. The margin between the global price and the Chinese price remains tight, discouraging significant buying from exporters. Within the United States, the cotton market also continues to tighten as export expectations are revised higher and stocks drop in 2016-17. Southern Hemisphere cotton harvest supplies should enter the market shortly, lowering the pressure on US cotton exports.

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Cotton Market Fundamentals

  • Supply
    • Global cotton production should climb in 2017-18 based on greater planted area. The global average yield, though, is expected to fall, diminishing the production growth.
    • The US Department of Agriculture's (USDA) Prospective Planting report projects a 21% increase in cotton acreage for 2017-18. The planting pace is also reported to be near the five-year average.
    • Cotton trading in Brazil has been slow during April, as the market gears up for new supplies to enter the market over the next couple of months.

  • Demand
    • The Chinese cotton price sits around 104 cents per pound; With a tight margin versus global prices, domestic Chinese prices need a drop in the global cotton price to move lower.
    • Chinese cotton stock auctions have sold 722,600 tons of cotton through mid-April. The average is 74% of what has been made available daily. Unless the pace increases, the projected drop in Chinese stocks may need to be revised.

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