Dwindling Supplies and Renewed Demand Are Current Catalysts for Cotton Prices
Cotton Production 041221
The cotton price picture is seeing some bullish factors come into play. USDA's latest World Agricultural Supply and Demand Estimates (WASDE) on Friday revealed higher exports - along with a smaller crop last year - continue to eat into overall supplies.
USDA showed ending stocks now sit at 3.9 million bales, which is equivalent to 22% total disappearance. And with dryness plaguing major cotton producing areas, like West Texas, 2021 could produce another smaller crop.
"With the weather challenges we had last year, the U.S. crop was not as large as originally expected," says Gary Adams, CEO of National Cotton Council (NCC). "In fact, it got quite a bit smaller. And so as a result, the stocks to use situation, which we went into the year with a lot of stocks, we're getting into year with a with a much smaller level of stocks. So, the overall balance sheet has tightened up."
Adams says it's not just smaller supplies, but a revival of cotton demand is also helping the cotton price picture.
"And then with China purchasing 5.5 million bales of U.S. cotton, along with the recovery in world demand, the recovery in the global economy, and then the production issues that we saw that really changed the price picture, I think those are still bullish factors going into the rest of 2021."
