Global trade tensions and weak economy hamper cotton prices

South African cotton prices are still declining, despite the second largest cotton yield on record.

According to the latest report by Cotton South Africa (Cotton SA), global cotton production in 2019/2020 was forecast to reach 27,2 million tons, 6% higher than the previous season and the second largest production volume on record.

However, the unabated downward trend in cotton prices was the result of the ongoing trade dispute between China and the US, which had resulted in a lacklustre economic environment, the report said.

“The weakening economic environment and slower economic expansion are negatively impacting cotton demand and consumption growth, exerting additional downward pressure on cotton prices.”

According to the International Cotton Advisory Committee (ICAC), the average global price for the 2019/2020 season was expected to be between US66c/lb (about R22,30/kg) and US102c/lb (R34,47/kg).

The current average price for cotton was around US81c/lb (R27,39/kg).

The expected 1,7% growth in global cotton consumption would not have a significant impact on international stocks, as the ICAC expected that ending stocks would increase in nearly all major cotton producing and consuming countries, apart from China, as global production remained relatively high.

The latest crop estimate for South Africa’s 2018/2019 production season indicated a total crop of 245 641 lint bales, up 31% from the previous season.

The area planted to dryland cotton had increased 42% to about 20 425ha this season, while the area under irrigation was up 22% at 23 502ha.

The total area planted to cotton was thus about 44 000ha this year, compared with the 33 628ha planted during the previous season.

This could be attributed to renewed interest in cotton production, the report said.