The US Department of Agriculture (USDA) reports price of cotton is forecast to fall by 12 per cent next season, despite a steep rise in Chinese imports and the prospect of 20 per cent of the crop in drought-hit US Southern plains being lost. The USDA, presenting its first full estimates for world cotton supply/demand in 2018-19, forecast the Cotlook, A index of physical prices, will “decline about 10 cents to 73 cents a pound” on a year-average basis.
The forecast came despite an estimate that world cotton stocks will drop by 5.9m bales to a seven-year low of 82.7m bales over the season. Chinese imports may rise 40 per cent to a four-year high of 7.0m bales as the country’s drive to erode its huge state inventories, built by a now-scrapped guaranteed pricing scheme.
USDA says, “China’s reserve could fall to just about 20 per cent of its peak of 53m bales by the end of 2018-19.” Inventories outside China, which in available to the world market are more significant in pricing, were estimated to rise next season by around 1.4m bales to a record high of 49.1m bales. Increased supplies outside of China are expected to pressure cotton prices in 2018-19. In the US, officials forecast stocks will stabilise at 6.0m bales next season, due partly to a forecast of exports growth by 1.5m bales, to a 13-year high of 16.0m bales.