Cotton prices stuck as demand remains weak

Cotton prices are stuck in a narrow trading range despite decent export sales, mainly to China, for their reserves. This lack of true consumer demand is keeping a lid on prices.

While the US Cotton belt has had good planting weather so far, additional rain is needed later in the season to avoid a price rally due to potential crop issues. New crop prices are expected to trade between 75 and 80 cents per pound in the coming month, with prices highly dependent on upcoming weather conditions. The July contract, now the benchmark, is forecast to trade between 77 and 83 cents, potentially dipping lower if global economic conditions worsen.

Although China has been a steady buyer, the cotton is likely going into storage and not being used by mills, which is the real indicator of demand. The number of countries buying US cotton is not a reliable price predictor in the current economic climate. Even though sales were made to 17 countries this week, prices remained flat. Historically, such sales would have caused a price increase.

Overall, cotton prices are unlikely to rise until true consumer demand picks up. Stockpiling by China is not enough to move the market. A production disaster, like the one seen earlier this year, is the only likely scenario to cause a significant price increase.