Increased Global Production Results in Modest Price Decrease

Cotton prices have continued their week-long slide due to increasing estimates of the world’s supply, but the decrease hasn’t been as steep as it might have been because global demand has been keeping pace and worldwide stocks remain at low levels. As a result, industry experts expect prices to remain at 72 to 74 cents in the near future, and could hit 80 cents by December.

Worldwide cotton production is expected to reach 116 million bales this year, an increase of more than 13 million bales over last year’s total, partially due to increasing output from the United States, the world’s top cotton exporter. In its July 9 Crop Production Report and World Agricultural Supply and Demand Estimates, the U.S. Department of Agriculture (USDA) upped its estimate of U.S. production by 10%, from 16.7 million bales to 18.3 million bales, largely due to excellent growing conditions (65% of the crop is expected to be rated as good to excellent).

Despite the increase in U.S and global production, rising demand still should result in worldwide stocks dipping below 50 million bales by August 2011, partially due to unfavorable growing conditions in China, the world’s largest cotton consumer. Global cotton stocks-to-use ratio currently is the lowest it’s been in 15 years.