China-US trade tension sparks drop in cotton price
06/06/2019
It said in its May market summary that international cotton prices declined considerably in the first half of the month, prompted by “a massive sell-off in New York”.
Cotlook explained that the catalyst for this was “the widely publicised deterioration of trade relations between China and the US”. It explained that a truce between the two trading partners that had been in place since December collapsed amid announcements of additional import tariffs.
“Commitments to China for shipment during the current marketing year have remained well below those of recent seasons,” it said. “The worsening trade relations have placed fresh doubt on the fate of some forward sales commitments to China [but] the availability of cotton from [China’s] reserve, added to the volume of cotton in commercial and industrial hands, would imply that China’s supply remains ample for the foreseeable future.”
Cotlook’s estimate of world production in 2019-2020 increased by more than 300,000 tonnes in May and, at 27.36 million tonnes, would represent the second-highest output on record. The rise was mainly attributable to the United States thanks to timely rain in West Texas, a major producing region.
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