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Cotton Prices Face Downward Pressure as Exportable Supplies Rise and Chinese Demand Cools

Cotton prices are expected to come under pressure in the 2024/25 marketing year as global exportable supplies increase and Chinese import demand potentially softens, according to a market report published by Cotton Incorporated on Monday.

The report highlights the anticipated surge in global cotton production, particularly from major exporting countries. The United States is projected to see the largest year-over-year increase, with output forecast to jump from 12.1 million bales in 2023/24 to 16.0 million bales in 2024/25.

"The largest year-over-year increase in production in 2024/25 is predicted to come from the U.S. (+3.9 million bales, from 12.1 million in 2023/24 to 16.0 million in 2024/25), which is projected to hang on as the world’s largest exporter," Cotton Incorporated states.

However, the report cautions that the US harvest is notoriously difficult to predict due to the concentration of production in West Texas, a region prone to drought. While recent rains have improved prospects for successful germination, the ultimate impact of weather on the US crop remains uncertain.

Beyond the United States, other major cotton exporters are also expected to see strong production. Brazil's harvest is projected to reach a new record of 16.7 million bales, while Australia is forecast to maintain output near its record level. West Africa is also anticipated to produce more cotton in 2024/25.

"Meanwhile, other sources of exports are expected to be plentiful," the report notes.

While exportable supplies are expected to rise, the report anticipates a potential pullback in Chinese import demand. China was a major driver of cotton imports in 2023/24, with shipments more than doubling from the previous year. However, much of this demand was attributed to purchases for the reserve system.

"Much of China’s import demand in 2023/24 has been attributed to purchasing from the reserve system," the report explains. "It remains to be seen how much fiber accumulated in 2023/24 will be leveraged against imports in 2024/25, but the potential for China to pull back on imports at the same time that exportable supplies are expected to rise may weigh on the market."