Cotton futures are pricing in news of China reportedly becoming a net exporter of cotton (and wheat) by the end of this decade due to the slump in their cotton industry. Cotton futures settled up 27 points today to close at .6276 cents per pound at the Intercontinental Exchange.
Of all China’s commodities produced, cotton is said to be the only market that has suffered negative demand growth since 2008, and is expected to continue through 2020. China is reported to have lost international competitiveness in the textile industry which is the reason they will no longer need to import cotton after 2018.
Jeff Evans, Vice-President of the Managed Accounts Division for RMB Group in Chicago, had this to say regarding the fundamental assessment of the cotton futures markets, “The boom in the cotton (futures) market four years ago was due in large part because of the boom in the Chinese marketplace.” Evans adds, “With Chinese demand subsiding, its anybody’s guess at what price cotton futures will find its floor. Traders must remain aware that these are cotton prices denominated in today’s stronger US$ than in years past, which has the potential to suppress prices (in US$).”
The trend for cotton futures is down (once again) as of this week with no bottom in sight. Cotton futures have been trading in a .07 cent range for the better part of this year and is still finding its direction.
ALL COMMENTARY IS CONSIDERED OPINION & VIEWS FROM THE AUTHOR AND NOT A SOLICITATION OF ANY SECURITIES. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.