Since more than enough cotton is piled up in global warehouses to make more than 127 billion T-shirts, or 17 for each person on the planet, there is no hope for the prices to rise. World inventories at the end of this season are being forecast to the second-largest ever against last year’s record, according to a US Department of Agriculture report last week.
Experts point out that while threats to the American crop helped make the fibre this year’s best-performing commodity, the gains may not last much longer since demand continues to decline. China, for instance, the world’s largest user, is curbing cotton imports by more than 30 per cent, leading to shrinking of global trade for the fourth consecutive year, states the International Cotton Advisory Committee.
Money managers boosted the net-long position in cotton futures and options by 26 per cent to 60,357 contracts in the week ended December 8, 2015, according to US Commodity Futures Trading Commission data. That’s the highest since May 2014. Prices in New York slid 1.5 per cent last week to 63.71 cents a pound.
Cotton is one of only two gainers this year among the 22 components of the Bloomberg Commodity Index, which is trading near a 16-year low. But the fibre’s upward journey is starting to dissipate. Prices are now up 5.7 per cent in 2015, paring advances of as much as 13 per cent.
Harvesting in the US, the world’s biggest exporter, witnessed adverse impact of heavy rains this year, and output is also expected to decline in China and India. Despite this, there is no fall in global stockpiles, which are forecast by the USDA to dip just 6.8 per cent from last year’s all-time high. The inventories will also be more than 35 per cent higher than the 10-year average.
There are signs that production will rebound. The USDA forecast that plantings will climb 13 per cent to 9.5 million acres next year, a report showed Friday. Societe Generale SA forecasts prices will average 62.9 cents in the first quarter and 62.7 cents in the second.
