The situation in Europe slightly improved in early February 2012, thus causing a rally in the market of cotton and other commodity markets. What is today’s price of cotton? What factors influence the market? What awaits cotton prices in 2012?
Tips For Investors: Global Distribution Of Cotton Production
According to the experts of :
Cotton is a plant grown to make cotton. It is sometimes called “white gold”. It is also vital for making jeans (which are so popular these days). Most of the global export is made of raw cotton. Harvesting campaigns usually take place in autumn (up to December in the Northern hemisphere). As for the global market of cotton, the peaks are usually seen in September while July and December are usually the month with the lowest trading performance. It is interesting to know that November’s sales are the most abundant. This is the time when the cotton pricing takes place. The prices formed in November usually remained stable until the next harvest.
Now let’s name the world’s biggest cotton exporters: China, USA, India, Pakistan and Uzbekistan. They account for 70% of the entire global market of cotton. China produces some 6.5M tons of raw cotton every year, India – 5,5M t, USA – some 4M t, Pakistan – some 2M t., Uzbekistan – some 1,5M t.
Current Market Situation
In January cotton appreciated by 2.6%. Analysts underline that this is the highest price since August 2011. Moreover, some calculations suggest that 197.50 cents per pound is 3 times as high as the average price taken for 30 years. The demand grows year by year while the global reserves keep getting scantier.
Higher cotton prices always result in more expensive clothing. Some experts hope that clothing manufacturers will preserve the prices on their products through reducing the price markup.
In mid January, the USDA downgraded its forecast for the global production of cotton. It is currently equal to 123 280K bales of cotton, which is 150 000 K bales less than was initially expected. The forecast change was caused by poor weather conditions affecting the harvests in the USDA and India. The USDA also reconsidered the forecast for the global consumption of cotton, thus downgrading it from 111M down to 110M bales. The reason is that China and Thailand has recently shown much lower demand for cotton. Therefore, it is possible to accumulate abundant reserves of cotton – 700K bales. The price of cotton is expected to fluctuate in the range between 86 and 94 cents per pound this year.
Major Cotton Exporters: Market Forecasts
The analytic team of Commerzbank anticipates 95 cents per pound in Q1 2012. They expect cotton prices to grow up to 105 cents per pound in Q2. It should be noted that in 2011 cotton depreciated by 37%. However, in December, China managed to initiate a slight rally in the market of cotton by showing higher demand for its.
The experts of Rabobank have another opinion. They assume that cotton won’t appreciate due to overproduction. By the end of Q1 2012 the price will decline down to 85 cents per pound. In Q3 it will go 5 cents down, thus making 80 cents per pound.
The expert team of Morgan Stanley suggests that the average price on cotton will be equal to $1 per pound this year while next year it will decline down to 80 cents per pound.
According to the Department of Commodity Trading, the market keeps moving within the $90-$100 per bale. Previously, the prices were declining on poor demand from China. The forecast for India’s cotton export was increased by 5% up to 8.4M bales.
Since the beginning of the season the export has already reached 4.4M bales. 3.9M bales were exported to China. At this point, there are no major factors influencing the price. However, there are rumors that the USA and China are planning to cut their cultivation areas by 10-12% and 8,2% correspondingly. Traders and investors are looking forward to February’s USDA report.
Therefore, the price is likely to continue fluctuating within the abovementioned price range.
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
Will cotton prices decline, increase or remain the same?
