Cotton prices remain unusually stable amid market equilibrium
While other commodity prices have seen significant fluctuations throughout the year, cotton has maintained remarkable stability.
Since January, cotton prices have consistently traded within a narrow range of 65 to 69 US cents per pound, a stark contrast to the volatility seen in other commodity markets.(SIS)
This week, cotton's historical volatility reached multi-year lows, underscoring the current calm.
According to Commerzbank AG, the difference between the monthly high and low in September was just 2 US cents.
This trend of limited price movement was also seen in July and August.
During the first half of the year, the typical monthly trading range was 4-5 US cents, with April being the only exception at 9 US cents.(SIS)
The German bank noted in an update on Friday that the brief spike in volatility in April stemmed from a temporary drop in prices to just over 60 US cents following US President Donald Trump's announcement of reciprocal tariffs.
“The decline in price volatility began last year, when prices peaked at nearly 100 US cents per pound in the first quarter of 2024,” said Commerzbank commodity analyst Karsten Fritsch in the update.
Market balance is a key factor
The current stability in cotton prices can largely be attributed to the near-equilibrium state of the market since last year.
For the current 2025-26 crop year, the US Department of Agriculture (USDA) projects a modest supply deficit of 250,000 tons.
This is based on an estimated supply of 25.62 million tons and demand of 25.87 million tons.(SIS)
The previous crop year saw an even smaller gap between supply and demand, with a modest supply surplus.
*This year, the US cotton crop is projected to be 8% smaller... A decline is expected, resulting from significantly reduced acreage and lower yields.(SIS)
However, the low abandonment rate (the difference between planted and harvested acreage) has helped to limit the overall reduction in crop volume, Fritsch said.
Due to the smaller crop and a modest increase in exports, US cotton stocks at the end of the crop year are expected to be slightly lower than at the beginning.
China's Dominance and the Impact of Trade Disputes
China has a significant influence on the global cotton market, ranking first in both supply and demand, ahead of India.
Since China consumes more cotton than it produces, it relies on imports.
These imports saw a notable decline in the previous crop year, and according to USDA forecasts, no significant increase is expected this year.(SIS)
Brazil, which surpassed the US as the largest cotton exporter two years ago, can easily meet China's import needs on its own.
"This is why the trade dispute will play a smaller role for cotton than for many other agricultural commodities," Fritsch said.
It is clear that this stability in cotton prices will not last forever.
While the current stability in cotton prices is not expected to last indefinitely, what will ultimately disrupt this equilibrium remains unclear.(SIS)
However, it is not entirely clear what could push prices out of their comfortable range.
Cotton prices have been unusually stable since January, trading between 65 and 69 US cents per pound.
This stability is due to a near-balance in the market, with a slight shortage in supply projected for 2025-26.
China's dominant role and Brazil's export capacity suggest that trade disputes will have a limited impact on prices.(SIS)
read more:- CCI sells 88% of cotton through e-auction, weekly sales at 2.95 lakh bales
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