ICAC: Trade Uncertainty Has Led To A Sharp Decline In Global Cotton Prices.

New data show that the uncertainty surrounding the US China trade war has pushed cotton prices down from the seasonal high in August (2018) to the new low in July (2019).

The updated monthly report of Cotton Advisory Council (ICAC) points out that the cotton price of the Cotlook A index has dropped from 99.5 cents per pound in August 2018 to 74 cents in July 2019.

This decline in price is largely in line with the worsening trade environment. The US first introduced the import tax on the US products to China in the early June (2018), and then increased the import tax on more products. Besides, the mainland also proposed counterattack tax to counter it.

In the early May, tensions between the US and China further escalated, including the US tariff of 25% on imports from the mainland of China, plus the punitive tariff of up to 25% to the US $300 billion imports from the mainland, including all textiles, clothing and footwear. This tone seems to have moderated with the new trade negotiations between the two sides.

In August 1st this year, US President trump released a tax increase plan in twitter. Since September 1st, the total sales of all surplus commodities in the US mainland have increased by an additional 10%, which has led to a surge in tension between the US and China.

Considering the use of cotton by factories in the world, raising taxes will have negative effects. It shows that the demand for garments in the United States may be affected by the rising cost of procurement.

ICAC acknowledged that optimism about the sudden increase in global cotton demand in 2019/20 is weakening, especially in the case of rising supply of cotton.

Cotton production in 2019/20 is expected to reach 27 million 200 thousand tons (6% growth over the previous year), and growth in consumption will slow down, down 1.7% to 26 million 900 thousand tons, which means cotton production will exceed 300 thousand tons of consumption.

Intergovernmental organizations said: "from this, global cotton stocks will increase to 18 million tons. Taking all these factors together with the mild expectations of global economic expansion, the next quarter's forecast of cotton demand is fading.

Cotton production in mainland China is expected to reach 5 million 990 thousand tons and will remain the world's largest cotton producer in 2019/20. It is estimated that India's 5 million 750 thousand tons will be second. Meanwhile, the output of West Africa is expected to hit a record high of 1 million 300 thousand tons.