‘Cotton This Month’ Reports Significant Surge In Prices
The latest ‘Cotton This Month’ report has reported a significant surge in the price of cotton, transcending initial market projections.
“This unexpected increase can be attributed primarily to a wave of speculative buying on the futures market,” the report averred.
The actions of speculative buyers have significantly increased the demand for futures contracts, ultimately exerting an upward force on cotton prices.
A common pattern emerges as speculators invariably attract additional participation in the market, creating a feedback loop that escalates buying pressure and, consequently, prices.
The real story will start to unfold in the next few months when planting intentions are solidified (at least in the Northern Hemisphere).
“Planting intentions have been lower than in previous years, and it remains to be seen whether the recent higher prices will incentivise farmers to increase the area under cotton,” the report added.
“If the planted area remains below previous seasons’ levels, and consumer sentiment improves, thus driving demand up in the 2024-25 season, then we can certainly expect higher prices to materialise and be justified by fundamentals, especially given the lower stocks in many of the largest countries,” the report stated.
The Secretariat’s current price forecast of the season-average A-index for 2023-24 ranges from 83.5 cents to 102.3 cents, with a midpoint of 91.73 cents per pound.
