The December global production demand forecast released by the International Cotton Advisory Committee (ICAC) believes that international cotton prices will remain at a high level in 2021/22.
In 2020/21, the Kotruk A index rose sharply, and the high prices will continue until 2021/22. Although cotton prices have increased significantly, they are far less than the surge in 2010/11, when ICE futures rose to a maximum of 243.65 cents/pound.
Although cotton prices rose significantly in the second half of the year, when the epidemic first broke out in early 2020 (January 29-April 1), cotton prices fell by 22%. Since then, cotton prices have maintained a slow upward trend until they accelerated in recent times. Hitting a ten-year high.
Cotton is an agricultural product. Production, consumption, weather and insect pests will all bring uncertainty to prices. The impact of the epidemic is even more prominent. Cotton prices will remain volatile for the rest of the year, but are unlikely to continue to rise sharply.
When cotton prices rose to a record high ten years ago, global cotton production was significantly reduced, while consumption remained at a high level, and China’s import demand was very strong. The ending inventory was only 9.3 million tons. Therefore, the international market was wildly hyped, driving cotton prices to skyrocket.
In 2020/21, global ending stocks were 20.35 million tons, much higher than the 9.31 million tons ten years ago. Even if cotton demand is healthy, opening stocks and production in 2021/22 can meet cotton demand. In addition, although there is some speculation in the ICE futures market, it is much inferior to that of ten years ago, and global production is expected to increase to 25.73 million tons this year, which can meet or even exceed the growing demand.
Based on the above situation, cotton prices may remain at a high level in 2021/22, but it is unlikely that prices will continue to rise significantly. It is basically impossible to repeat the skyrocketing situation ten years ago. With the recent mutated virus strain “Omicron” attacking the world, global logistics and transportation problems may further intensify.
This month, ICAC expects the Kotruk A index for 2021/22 to fluctuate between 91 and 119 cents/lb, with a mid-range price of 103.29 cents/lb.
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