Chaotic trade policies and tight markets are resulting in global uncertainty for the cotton sector. While production and consumption are projected to increase in the current crop year, higher production will result in world stocks increasing three per cent after two years of decreases in global stocks.
Consumption in 2018-19 is projected to grow five per cent with production projected to increase to 25.9 million tons. With consumption expected to outpace production in 2018-19, global stocks are expected to decrease to 17.8 million tons.
Cotton demand is up, especially in Asia and South Asia, but drought conditions in the West Texas region of the US, plus the potential of new tariffs on cotton from trading partners like China are serious concerns and one of the reasons prices have dropped. Trade relations between the world’s largest cotton exporter, the US, and the world’s largest consumer, China, have been tense.
With tariffs against China taking effect, American consumers are one step closer to feeling the full effects of a trade war. These tariffs will do nothing to protect US jobs, but they will undermine the benefits of tax reform and drive up prices for a wide range of products. The price forecast for cotton in 2017-18 is 86 cents per pound.