USDA reports price of cotton is forecast to fall by 12 per cent next season

cottonThe 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.