Cotton prices to tumble in 2018-19, despite surge in Chinese imports | Agrimoney

Cotton prices will drop by some 12% next season, despite a surge in Chinese imports, and the prospect of 20% of the crop planted in the drought-hit US southern Plains being lost, US officials said.

The US Department of Agriculture, unveiling its first full estimates for world cotton supply and demand in 2018-19, forecast that the Cotlook A index of physical prices will “decline about 10 cents to 73 cents a pound” on a year-average basis.

The forecast came despite a forecast that world cotton stocks will fall by 5.9m bales to a seven-year low of 82.7m bales over the season.

Meanwhile, Chinese imports, another dynamic closely watched by traders, may soar 40% to a four-year high of 7.0m bales as the country’s drive to erode its huge state inventories, built by a now-scrapped guaranteed pricing scheme, bears fruit.

Shrinking Chinese stockpile

However, the USDA added that it was the extent of China’s success in cutting its stockpile, which was behind its forecast for the slide in world stocks.

“China’s reserve could fall to just about 20% of its peak of 53m bales by the end of 2018-19.”

Inventories outside China, which in being available to the world market are more significant in pricing, were forecast growing next season by some 1.4m bales to a record high of 49.1m bales.

The Cotlook A index, which on Thursday stood at 90.20 cents a pound, was forecast falling “due to projected higher stocks outside of China.

“Increased supplies outside of China are expected to pressure cotton prices in 2018-19.”

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Agrimoney – News – Cotton prices to tumble in 2018-19, despite surge in Chinese imports.