Cotton Prices Again Down Amid Rising Pessimism (Weekly Report) - Emerging Textiles

US Cotton Futures. Physical Prices. Spot Prices in India and Pakistan

Cotton Prices Again Down Amid Rising Pessimism Weekly Report

14 July 2008

Cotton prices continued last week declining amid new signs of falling global production and consumption in the next season. A rebound in other commodity markets was ignored on the U.S. cotton market while such a weakness did not trigger a recovery in physical demand, however. Indian domestic prices started declining after New Delhi eliminated tariffs and taxes on cotton imports.

Cotton prices were last week weaker on the New York market amid stronger volatility.

Key December contract lost 2.34% or 1.76 cent per pound.

Commodity prices last Friday rebounded, in line with a new fall in the New York stock market and another decrease in the US dollar.

Cotton futures however ignored this speculation trend, with settlement prices staying unchanged at the end of the session.

The United States Department of Agriculture (USDA) had however released a relatively "bullish" report, lowering its forecast for ending stocks at the end of next season.

Demand is Weakening in China

Decisive price-to-use ratio was cut by 0.25% at 42.28%.

Although cotton prices look cheap if compared with other commodities, demand is expected to weaken in Asian countries.

China's cotton consumption was lowered by the USDA and this will result in less cotton imports from the country.

Physical demand is also far from being boosted by the recent drop in cotton prices.

U.S. export sales of upland cotton only were 53,600 running bales of 500lb each in the week to July 3rd.

This is a very low level, but prices further slided after this date and demand may have been stronger in the last week.

Cotton Prices remain at a too high level for spinners with certain plants even preferring to sell their cotton inventories rather than producing and selling yarns.

Lower Indian Prices

The removal in import tariffs and taxes in India did not boost cotton futures in the United States, as demand from India is not expected surging, as a consequence.

In India, however, domestic prices declined in the past week with Shankar-6 losing 400 rupees per candy (1.24 cents per pound).

In rupee terms, however, the Shankar-6 is still 34% above its level a year ago.

Prices remained stable in Pakistan where spinners are waiting for first arrivals from the new crop.

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