Uncertainties In The Global Economy The Price Of American Cotton Futures Is At A New Low

As of July 29, 2024, CC The cotton price of Index3128B was 15470 yuan/ton, a slight increase of 1 yuan compared with the previous trading day. However, the overall market sentiment is pessimistic, mainly due to the increase in global cotton supply and the recovery of downstream demand. American cotton futures prices hit a new low since October 2020 on July 24, while domestic Zheng cotton futures prices also fell to the lowest point since the end of March 2023 on July 25.

Fundamentally, the global cotton output is expected to increase, especially the improvement of rainfall and good growth of new cotton in the cotton producing areas of the United States, which indicates that the output may rise significantly. At the same time, the increase in the quantity of imported cotton in China may lead to a decrease in the import demand in the new year, thus intensifying the pattern of loose supply and demand.

According to the data of the US Department of Agriculture, the global cotton sales volume in 2023-24 is 74200 bales, and Vietnam, Turkey and Nicaragua are the main buyers. However, with the increase of sales volume in 2024-25, the purchase volume of Mexico, Vietnam and Turkey will increase significantly. This shows that although the overall market demand has increased, the supply is also rising at the same time, resulting in price pressure.

In addition, cost pressure is also an important factor affecting cotton prices. Gohar, General Sponsor of Pakistan Textile Mills Association Ejaz warned that if the agreement of independent power producers (IPPs) was not modified, high energy costs would force industrialists and traders to close their businesses. This cost pressure not only affects the production cost of cotton, but also has an impact on the entire textile industry chain.

The downward trend of cotton futures prices has taken shape. The price of cotton futures in New York has dropped to 67-68 cents per pound, the lowest level in nearly four years. This price decline reflects the market's concern about cotton oversupply. At the same time, market sentiment has also been affected by the downturn in the international market, and panic selling occurs from time to time.

The cooperation between the Pakistan Central Cotton Committee (PCCC) and the FAO has brought a glimmer of hope to the market. Yousaf Dr. Zafar said that such cooperation would help to improve cotton production technology and keep it in line with international standards, thus promoting the development of cotton industry. In addition, Asif, Chairman of APTMA Inam also pointed out that the reduction of power cost is the key to improving export competitiveness.

The market concerns include the export sales report of the U.S. Department of Agriculture, the domestic and foreign collection and storage policies, and the development of trade relations. For example, according to the data of the US Department of Agriculture, the total contracted volume of US cotton this year was the lowest level in the same period in the past eight years, which may have an impact on the market. At the same time, domestic policies such as freight subsidies for cotton exported to Xinjiang and central reserve cotton sales columns are also constantly adjusted, affecting market supply and demand and prices.