Cotton prices expected to hit five-year high in 2018/2019 season

Cotton prices may edge up to their highest in five years next season, according to International Cotton Advisory Committee forecast cutting inventories to the lowest since 2011-2012.

The intergovernmental group, in its first forecast for cotton prices in 2018-19, which starts in August, saw them averaging 84 cents a pound, as measured by the Cotlook A index of physical values.

That would represent a small improvement from the price expected for this season, which Cotlook hiked by five cents a pound to 83 cents a pound.

The group failed to elaborate on the reasoning behind the upgrade, although it follows consistently higher prices than many commentators had envisaged earlier in the season, with the Cotlook A closing last week at 89.95 cents a pound.

The 84 cents-a-pound cotton price the ICAC forecast for next season would also be the highest since 2013-14, when prices averaged 91 cents a pound, before tumbling to 70 cents a pound two seasons later as China curtailed imports and focused on drawing down bloated state inventories.

The ICAC’s price forecast came as it trimmed by 220,000 tonnes, to 17.93 million tonnes, its estimate for cotton inventories at the close of 2018 and 2019.

Stocks at that level would be the lowest since 2011-12 when US inventories were recovering from a 20-year low.

The committee, highlighting a “positive” short-term outlook for the cotton market, flagged the prospect of accelerating growth in demand for the fibre, seen increasing by more than 1.1 million tonnes next season after an 880,000-tonne rise in 2017-2018.

“Consumption which has steadily increased over the last three seasons – is expected to continue rising,” the ICAC said.

It noted factors, including “the rising production costs of synthetic fibres and growing awareness of the environmental damage being caused by microfibre pollution”.