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World cotton prices may fall lowest in nine years

World cotton prices may tumble next season to the lowest in nine years. China's share of world inventories is expected to decline to 44 per cent, which would be the first time since 2011-12 that it held less than half of global stocks. Cotton stocks held outside China, meanwhile, are expected to rise by 17 per cent. This would be one of the highest volumes on record and indicates that prices should fall.

Large stocks, in cutting the need for buyers to pay up to secure supplies, are seen as a negative signal for prices.

China has been reducing its stocks through measures including the reform of a guaranteed pricing scheme for farmers – which in being set at a level well above world values had led to an inventory build-up, which is now being reversed by a program of auctions from stake stockpiles.

By contrast, supply prospects elsewhere have been boosted by the knock-on effect of this season’s elevated prices in encouraging farmers to plant the fiber.

In India, for instance, sowings are expected up eight per cent. An early and adequate monsoon, a higher minimum support price, and the prospect of better returns from cotton compared to competing crops have encouraged farmers in India to expand area.

In Pakistan, too, sowings were seen rising by eight per cent. Higher seedings were seen helping US output this year soar by 12 per cent.

 
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