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High stocks and low demand drive down cotton prices

Oct 07, 2019 (MarketLine via COMTEX) --

Cotton prices have fallen to their lowest levels since 2016 as modest growth in major consuming countries, combined with high stocks, has tempered demand for exports.

In its latest monthly update, the International Cotton Advisory Council (ICAC) says with plentiful supplies and weak export demand, the price on the Cotlook A Index has dropped to its lowest point in the last three years.

The Cotlook A Index began August at 74.80 US cents per pound, before falling to a low point of 69.30 US cents towards the end of the month.

For September, the Cotlook A Index cotton price is at a current level of US$1.57 per kilogram, up from $1.56 last month and down from $1.99 one year ago. This is the lowest reading since 2016 when prices hit $1.44 per kilogram, and represents a change of 0.75% from last month and a decline of 21.08% from one year ago.

Meanwhile, the ICAC forecasts that although global consumption in the 2019/20 season is expected to increase, the gains will be minimal as production (at 26.8m tonnes) is expected to slightly outpace consumption (at 26.5m tonnes). 

East Asian countries will continue to lead the world in consumption, but growth is likely to be modest in the region; while China's 2018/19 consumption total of 8.25m tonnes is expected to remain unchanged in the coming season.

Several major consuming countries should see gains – including India, Bangladesh and Vietnam – but overall growth is slowing, and none of those countries is likely to see gains of 2% or more, with the exception of Indonesia where growth is projected at 4% over 2018/19.

Elsewhere, the US is forecast growth at 3%, while Pakistan, Brazil and Mexico are all also expected to be flat on the prior season.

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