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Cotton Prices Surge to Highest Level in a Decade

2021-10-06 10:45:31
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Cotton Prices Surge to Highest Level in a Decade

China buys up U.S. supplies of crop, even as Trump-era import ban limits use of Chinese-grown fiber

Cotton futures are trading at their highest price in about a decade, with growing Chinese demand being met in part by rising U.S. exports to China, a curiosity of Trump-era trade-war policies.
Most-active U.S. cotton futures trading on the Intercontinental Exchange closed Tuesday up 3.8% at $1.09 a pound, keeping prices at their highest level since September 2011. Prices have risen 22% over the past 11 sessions.

Higher clothing prices could eventually follow.

Prices for other raw materials, such as lumber, have surged this year, because of high demand and supply-chain kinks that have kept goods from getting to customers who want them. Prices for other U.S. crops, such as corn and wheat, have jumped this year amid drought conditions in the U.S. and abroad. Cotton shows the sometimes-unexpected effects that trade policy can have on prices.

Last year, President Donald Trump banned U.S. imports of clothing and other products made of cotton from the Xinjiang region, China’s largest cotton-producing area. The administration said at the time that there was evidence that the products were made with forced labor by the Uyghur ethnic group.

“China has become more active in the world market,” he said, adding that the U.S. can offer the volume and quality of cotton that China wants.
Yet, China’s robust demand for cotton and other raw materials could peter out. Power outages have swept through Chinese provinces, with the government sometimes forcing factories to shut down to save energy. The National Bureau of Statistics in Beijing reported Thursday that the country’s manufacturing activity contracted in September, ending an 18-month expansion streak.
“Power rationing will constrain industrial activity until demand weakens enough to bring the domestic electricity market back into equilibrium,” said Julian Evans-Pritchard, senior China economist with Capital Economics, in a note last week.

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