Weakening demand, big supplies and China dog cotton market

Weakening demand, big supplies and China dog cotton market

Used to be, the cotton market rose and fell on fairly predictable fundamentals. After you subtract demand from supply, the difference typically correlates to price.

Then China began to meddle in its domestic cotton industry. Soon it built a 100-million bale-plus reserve, some of which is now five years old. Its effect on the global cotton industry has been ground-shaking.

  • Terms like “artificial tightness” buzzed.
  • Two-dollar cotton happened.
  • Cotton blend percentages fell.
  • Consumers didn’t seem to notice.
  • Years of work building demand seemed to vanish.
  • Cotton prices fell.

The mess could take three or four years to sort out, according to global cotton expert Ed Jernigan, who summed up the new fundamentals acting on the cotton market at the Ag Market Network’s February conference call. Listen to it here.

TAGS: Outlook
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