Cotton Prices Stay Low on Chinese Stockpiles, Big Crops

There appear to be two constraints on prices. First, China just completed building up a stockpile of nearly 19 million 500-pound bales as it replenished stocks from previous releases that were intended to keep prices in the country reasonable for cotton mills. Over the past two years, China accounts for two-thirds of the increase in cotton stockpiles.

Second, the US Department of Agriculture estimated cotton plantings in the US this year of 13.16 million acres, higher than a market estimate of 12.9 million acres. That means more cotton and lower prices.

The only possible bright light is the government of India’s ban on exports, instituted last month, is likely to last until the country’s currency strengthens versus the Chinese yuan. Which could take a long time.

Paul Ausick