Karachi:The recent rise in cotton prices may have some wondering if there might be a repeat of the historic price rise during the 2010\/2011 crop year, during which raw cotton prices escalated well above $2.00 per pound. With near-record global supply, history is not likely to repeat itself in this regard.
\nThe current rise may be attributed to several factors, including seasonality, a unique situation relative to India and Pakistan, as well as certain details related to sales from the Chinese reserve program.
\nSome of the recent movement in cotton prices can likely be traced to Pakistan and India.
\nLast year, growers in Pakistan had a challenging season due to weather and pest issues that pulled yields 30 percent lower. With less cotton available domestically, Pakistani mills had to import cotton and actually imported their second-highest volume on record (up 2.2 million bales year-over-year).
\nIt is important to note that most of Pakistan\u2019s imports come from India, and it appears that Indian shippers may have been too aggressive, too early.
\nThere have been reports that India has had to re-import cotton back from Pakistan. According to recent trade data for March-May, India imported 44 percent more cotton from all sources over those three months than the year before.
\nIndia has traditionally been a source of cotton to the world, but the fact that the country has had to instead pull cotton from the rest of the world has likely had an effect on cotton prices elsewhere. The magnitude of the price increases in India has been dramatic, with values climbing from the mid-60s a couple of months ago to around 90 cents\/lb more recently.
\nChina remains a separate market because of import restrictions, but there have also been increases in cotton prices in China due to tightness in supply.
\nAs has been the case in recent years, price movement can be associated with government action. In this case, ironically, the increases over the past couple months were concurrent with releases from the government\u2019s reserve program. The auctions have been successful, with virtually all the cotton (domestic and foreign) offered for sale being sold. In previous rounds of sales, uptake has been around 5 percent; this time it has been near 100 percent.
\nWith sales from reserves representing a new source of supply for the Chinese market, the issue of scarcity in China is a little complicated.
\nOne reason supplies have been tight is that Chinese mills were anticipating the government would sell cotton at lower prices this spring. Because of that, mills didn\u2019t want to be holding more expensive fiber before sales began and most mills entered the auction period with little inventory. This explains why virtually all of the cotton offered for sale has been purchased.<\/p>\n","protected":false},"excerpt":{"rendered":"
Karachi:The recent rise in cotton prices may have some wondering if there might be a repeat of the historic price rise during the 2010\/2011 crop year, during which raw cotton prices escalated well above $2.00 per pound. With near-record global supply, history is not likely to repeat itself in this regard. The current rise may […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-1168","post","type-post","status-publish","format-standard","category-business"],"yoast_head":"\n