Chronicle of raw materials
Cotton fetches prices beyond reason
Audio 01:41
A worker sprays water on a pile of cotton at a cotton processing unit in the town of Kadi in the western Indian state of Gujarat, India, April 5, 2018. (Illustrative Image) REUTERS - Amit Dave
By: Marie-Pierre Olphand Follow
2 mins
Cotton continues to rise, prancing around $1.50 per pound.
A new record since 2011, which leaves industry experts perplexed.
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The refrain heard has been the same for months: nothing justifies such a rise in cotton prices.
But the facts are there, prices continue to climb.
At $1.30 a pound a month ago, cotton is now selling at $1.50 for delivery next July, or $3,300 a ton.
“
We are coming to the edge of the precipice
,” confides a trader who points the finger at the responsibility of speculators and in particular the investment funds which have entered the market and are waiting, he says, in ambush.
Words revealing a disoriented industry, not to say deregulated.
A justified increase, only in part
Supply and demand are certainly calling for an increase: there is little cotton left to sell today before the next harvests, the drought in Texas, and in Brazil announces lower harvests - Argentina has already lost 25% of its production and the rest is of a lower quality than expected – and the surfaces could decrease, in view of the immense needs in food cultivation.
Yields should also be affected by the price of inputs.
But "
all these parameters are already integrated into the current prices and do not justify the continuous increase noted
", explains one of our interlocutors.
The price of freight which does not weaken complicates the deal.
Maritime bottling is still in force and the containers wait three, four or five months before transporting the cotton.
While some spinning mills choose to pay unreasonable prices to continue spinning, particularly in Pakistan and Bangladesh, overall most are limiting their purchases, unable to pass on price increases.
The trend should not be reversed before the end of 2022
Another revealing fact of the peaks reached, China has started to sell some of its stocks bought at a lower price, to take advantage of the price differential.
"
Making cotton today is a matter of acrobatics
", summarizes Georges Toby, member of the Branson Commodities office and one of the leaders of the Association of Cotton Producers of Santa Fe and Argentina, who does not see the trend change before the end of the year.
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Also to listen: A lucrative campaign is coming for African cotton
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