The global cotton market is facing a bearish outlook due to expectations of higher production in key regions and concerns about a drop in consumption, according to analysts.
Research agency BMI, a unit of Fitch Solutions, stated that positive harvest outlooks in major producing markets for 2024-25, combined with pessimistic consumption expectations, will likely keep a lid on prices.
The International Cotton Advisory Council (ICAC) highlighted the challenges faced by cotton farmers in both the Northern and Southern Hemispheres in making critical planting decisions amid extreme uncertainty.
The US Department of Agriculture (USDA) noted a decline in cotton’s market share in global fiber consumption, limiting the potential for growth in cotton product imports despite strong consumer demand for apparel and home textiles. Additionally, competition with man-made fibers, particularly from China, has posed challenges for the cotton market.
For the 2024-25 season, the USDA raised its cotton production estimate to 121 million bales, with increases in China offsetting reductions in Pakistan and Argentina. Global consumption and trade are also forecasted to increase, driven by higher use in key markets such as Pakistan, Bangladesh, and Egypt.
BMI predicted a 6.3% year-on-year increase in global cotton production for 2024-25, with higher yields expected in China, Brazil, and the US. This surplus in the market is likely to impact prices, prompting the research agency to revise its cotton price forecast lower for ICE-listed second-month cotton futures.
The USDA reported a decline in net long positions for cotton futures, with prices currently around 66 cents per pound. Despite prices being lower compared to last year, speculators continue to sell cotton futures contracts in anticipation of further price drops.
Overall, the cotton market is characterized by bearish sentiment, with uncertainties around production, consumption, and pricing influencing decision-making for growers and traders alike.
