China’s Restrictions Takes Cotton Futures to a Five-Year Low

It’s a complicated situation for cotton futures with the current outlook of China restricting its future cotton imports and possibly leaving more supply on the table with inventories already at highs. After all, they are the world’s biggest buyer and producer of cotton.

To be specific, China stated (day before yesterday) it will impose a restriction on its cotton imports during 2015. Here in the US, favorable weather has boosted the prospects for an abundant harvest and cotton futures have responded by dropping 27% year-to-date.

Cotton futures is finding pressure from China’s announcement that it will cut back on imports next year and is in the process of getting rid of some of it’s current stockpile. Additionally the U.S. harvest is progressing at a normal rate, but the crop good to excellent ratings are well ahead of last year,” said Barb Levy, chief director for The Fox Group’s futures division in Chicago, sharing her insight regarding the current cotton futures situation.

The trend for cotton futures is down, and any bottoming action that was forming is now negated with a breakout to lower lows just today. Cotton futures next target – in my work – shows initially the mid-.55c range followed by the mid-.51c area. We continue to be short cotton futures from last week.

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