Cotton outlook bearish on higher output, low offtake

The outlook for the global cotton market is bearish on hopes of higher production in key producing regions and fears of a drop in consumption, analysts have said. “We believe that positive outlooks for harvests in large producing markets for 2024-25, coupled with downbeat expectations for consumption, will maintain a cap on prices,” said research agency BMI, a unit of Fitch Solutions. The International Cotton Advisory Council (ICAC) said in a statement that cotton farmers in both the Northern and Southern Hemispheres are currently facing a daunting task how to make critical planting decisions during a time of extreme uncertainty. Pointing to the ICAC’s World Textile Demand Report 2024, which said cotton’s market share in global fibre consumption has dropped below 25 per cent, the US Department of Agriculture (USDA) said this limited the potential growth for cotton product imports, despite record consumer demand for apparel and home textiles.“Competition with MMF (man-made fibres) is especially challenging with respect to Chinese MMF exports.” “US cotton product imports from China have nearly halved since peaking in 2010, while MMF product imports have risen more than 30 per cent during the same period,” it said. For the 2024-25 season, the USDA has raised the cotton production estimate by 5,00,000 bales (226.8 kg) to 121 million bales. This is because of a 7,50,000-bale increase in China more than offsetting reductions for Pakistan and Argentina. The research agency said it lowered its 2025 cotton price forecast for ICE-listed second-month cotton futures from an annual average of 80 US cents a pound to 72.2 cents.The USDA lowered the US season-average farm price for 2024-25 to 63 cents. ICAC has forecast the season-average Cotlook A index for 2024-25 between 92 cents and 97 cents, with a midpoint at 94 cents per pound. Currently, the Cotlook A Index is at 79.25. May cotton futures on the InterContinental Exchange, New York, are currently ruling at 66.62 cents. ICAC said growers particularly in the US, India and China face a complex set of factors influencing their cotton planting decisions.