The Humankind discovered cotton over 7 thousand years ago. This is a widely used, valuable (and to some extent irreplaceable) commodity. These days cotton prices are determined by a number of factors. The major ones are harvests, the supply-demand ratio and even crude oil prices.
Cotton Producers
The world’s major cotton producers are China, India, USA, Brazil and Pakistan. Together they account for 75% of the global production of cotton, reports.
China. It is considered the world’s major cotton producer – over 6 600 K tons a year. However, even this production volume cannot sometimes satisfy the domestic demand for cotton. This financial year China is planning to replenish its reserves with 1 300 K tons of Indian cotton.
India. It’s the world’s number 2 in terms of cotton production. India’s current cotton reserves are estimated at 5 530 k tons. However, they are expected to reduce down to 3 660K tons. Its export of cotton in the 2011-2012 season exceeded the limit by 1.1 million bales, thus reaching 9.5 million bales, mostly due to the increased demand shown by China. In March 2012 the Indian government imposed a temporary embargo on the export of cotton but it raised some concerns as China was intended to import 1.3M tons of cotton form India. So, the Indian authorities had to cancel the embargo on the export of the existing reserves but announced they might ban the export of the future harvest.
USA. It comes 3rd in the list with 3 942 K tons.
Pakistan. It is number 4 – 1 916 K tons.
Brazil occupies the last place in the TOP 5 – 1 851 K tons.
Export. The USA is the world’s leading cotton exporter – 1 135 K tons. India comes 2nd – 1089 k tons. Uzbekistan is number 3 – 577 K tons. Australia and Brazil are number 4 and 5 - 566 and 435 k tons correspondingly.
What is the ratio between the global reserves and consumption of cotton?
In the 2011-2012 season, the global production of cotton was higher than in the previous season while the global consumption was lower.
Production. It is expected that the final global production report for the 2011-2012 season will reveal the record-high level of 123 600 K bales, thus exceeding the previous harvest by 6%.
Consumption. The global consumption of cotton is expected to increase by 4.1% up to 114.5 million bales this year.
At this point, cotton prices are seeing downtrend due to excessive reserves. However, the demand is expected to sharply increase in the short run, thus probably pushing the prices up. Moreover, the world’s major cotton producers have cut their cotton acres.
According to the Commodity Trading Department of , technically, the price has just rebounded from the top of the current price range. The closest level of support is $90 per bale. However, the price is most likely to break below it to test another major level of support located at $87 per bale.
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:
What is your cotton market outlook for 2012?
