On November 2, the U.S. cotton CFD contract once exceeded $1.2/pound, and the price soared to near a 10-year high.
As the most active futures on the New York Stock Exchange recently, the price of U.S. cotton has increased by more than 45% this year. It is worth mentioning that in 2011, the price of US cotton once soared to more than US$2 per pound, far exceeding today’s US cotton trading price.
Supply shortages may intensify, and clothing prices may rise
From the perspective of supply and demand, the cotton supply gap may further expand this year, and cotton prices may further remain high.
From the supply side, the decline in supply from the United States, India and other countries may worsen the global cotton supply gap.
On October 30, the Indian Cotton Association stated that the country’s cotton exports will fall by 38% in 2021-22; according to Drew Lerner, President of World Weather Inc., some U.S. The yield and quality of cotton in growing areas may be damaged by recent heavy rains.
From the demand side, the recent haze of the epidemic has gradually dissipated and the approach of winter shopping festivals around the world has boosted the demand for cotton in various markets.
According to Bloomberg, analysts predict that cotton demand from China, the United States, India, Vietnam, Pakistan and other countries will also surge in the future.
Independent analyst Ajay Kedia previously said:
“With the decline in pandemic cases and Diwali approaching, India’s domestic Consumption (for cotton) will be very strong.”
It is worth noting that U.S. cotton prices have risen by more than 45% this year, resulting in a sharp decline in profit margins for apparel manufacturers. This may threaten the prices of various cotton products such as T-shirts and jeans. For consumers who are already facing pressure from high-priced food and high-priced energy, rising commodity prices driven by rising cotton prices may make them even more miserable.
Active speculation accelerates price rises
It is worth mentioning that, apart from the relationship between supply and demand, In addition to the rise in cotton prices supported by cotton price fundamentals, commodity futures trading is also a factor boosting the current round of cotton price increases.
According to John Robinson, economist at Texas A&M AgriLife Extension Service:
“Cotton futures have moved rapidly in recent weeks. Rising, because speculators began to buy in large quantities based on expectations of rising prices, in order to make potentially huge profits.”
At the same time, according to Bloomberg, some futures investment institutions hold large amounts of For short positions, traders must buy futures contracts to close their positions and stop losses, which has further pushed up the recent rise in U.S. cotton. Ollie Cleveland, a consultant and professor emeritus of economics at Mississippi State University, said this has become the biggest supporting factor for U.S. cotton prices to reach higher levels. </p
