As the 2021/22 season draws to a close, Cotton This Month’s June issue demonstrates that decreased crop sizes in some of the leading cotton-producing nations, including India, Argentina, and South Africa, have caused demand to exceed output. Although they were mostly in line throughout the year, the smaller-than-expected crops mean that consumption will likely outweigh output by around 265,000 tons. The stocks-to-use ratio, which compares the amount of available cotton stocks to the amount of cotton mill use, can be used to calculate the link between cotton supply and demand in order to evaluate the effect of those numbers on pricing. The ratio is lower when demand is higher than supply. A decreasing stocks-to-use ratio can be a sign of rising costs. In contrast, when supply outpaces demand, the ratio rises, pushing cotton prices lower. Prices can be significantly impacted by vegetation as well.
