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Cotton prices hit ten-year low on uncertainty over coronavirus

The global fashion business journal

MAR 24, 2020 — 10:00AM

The decrease in production, together with the fall of demand and the paralysis of cotton exports to the United States are some of the factors that motivated the price fall.

Coronavirus hits cotton. The prices of the most popular raw material in fashion have sunk to a ten-year low in the last weeks. New York Cotton Futures reached 53.6 cents per pound last Friday, its lowest level since 2009.

This decrease is partially motivated by the halt of production due to the coronavirus outbreak. “This responds to expectations, given that the fall of production and demand has moved some of the cotton deals”, explains Spanish textile expert Salvador Maluquer.

Year-to-date, cotton prices have plummeted by 23%, one of its largest decreases since the beginning of the century. The previous deflationary turn took place between mid-2018 and August, 2019.

Then, the fall was influenced mainly by the trade war between China and the United States. Tensions between both countries led cotton prices to 58 cents per pound last August, down 37 cents.

The previous fall, last year, was motivated by the trade war

The US Department of Agriculture included in its forecast for 2020 the great impact trade war would have. The institution estimated that cotton production in the US will fall 9% this year, down to 12.5 million hectares and 600,000 bales.

However, with the progressive de-escalation between both countries, cotton started a recovery face last august, reaching a peak of 72 cents per pound last February.

Since then, coronavirus has forced factories to close, production to freeze and stores to shut, damaging demand from Asia, Europe and America. The first sign of a turning point came at the end of February. On day 28, cotton was trading at 62 cents, far away from the 68 cents per pound of the previous day.

On March, 2nd, the prices of the raw material temporarily stopped their fall, trading at 63 cents per pound. But the falls soon resumed and, since March, 12th cotton prices have plummeted down to 53.6 cents per pound.

According to the latest estimates by the International Cotton Advisory committee (Icac), cotton trade will rise 2% this season, reaching 9.4 million tons. The entity estimated cotton prices to reach 80 cents at the end of the season.

A rollercoaster decade

The latest fall has led cotton prices to a ten-year low. On Friday, this raw material was near its historical minimum, marked in 2009 at 43 cents per pound, amidst the Great Recession. Since then, cotton ha recovered, reaching peaks in 2010 and 2011, due to the huge stock build-up in China, and in 2011, when it reached 2.13 dollars per pound.

Cotton prices have been o a rollercoaster, from 93 cents in 2013 down to 57 cents in December, 2014. Cotton prices also fluctuated during the last campaign, up from the 99.5 cents at the beginning of the season down to 84 cents at the end.

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