12 November 2012
Cotton prices further decreased in past week, over rising uncertainties about China's cotton policy and with spinners remaining very shy in ordering cotton for long-term use. Our weekly cotton report covers the latest price trends of international spot and futures markets through a large number of tables and charts, with also domestic markets in India, China, Pakistan being reviewed. Historical data back to 6 years ago are available for download.
Cotton prices further fell in the last week, over a lack of demand on futures and physical markets.
For the first time since July 26th, the New York nearby contract fell below the symbolic level of 70 cents per pound.
Meanwhile, the Cotlook A index slided below the 80-cent level on last Friday.
These are clear signs of downward trends on the cotton market.
The US Department of Agriculture (USDA) on Friday released its monthly forecast which obviously was a bearish one.
Ending stocks were further raised, with the stocks-to-use ratio now expected reaching 75.49% by the end of current season.
This is of course due to accumulation of record stocks for state reserves in China.
Uncertainties are however increasingly rising over China's cotton policy in coming months.
Beijing may refrain from selling its huge stocks on the market in order to maintain farmers' earnings at acceptable levels.
The China's textile inudustry may therefore be tempted to further buy cheaper foreign cotton, which would offer some more support to international prices, whatever the huge size of Chinese stocks.
In addition, if cotton prices did not strongly fall in last 12 months in China, they also remained relatively firm in Pakistan and India, if compared with New York futures or international physical prices (A Index), as reflected by our below chart.
Textile producers in India and Pakistan may take advantage of current problems experienced by Chinese rivals which would increase cotton use in both countries.
China's demand for Pakistani yarns is rising in addition, even if less strong for Indian yarns this season.
The yarn industry may be expected remaining very prudent as a result, only ordering for short-term needs with more uncertainties to come on international market.