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Cotton Prices Drop 3 Percent in May

Cotton prices continued their see-saw ride in May, falling almost 3 percent in the month following a more than 4 percent increase in April that occurred after a two percent decline in March.

So far this year, prices have risen by about 7 percent, though remain 22 percent below year-ago levels.

According to the latest data from the U.S. Department of Agriculture (USDA), the seven-market U.S. average cotton spot price dropped by almost two cents per pound to $0.624.

However, it is unclear why prices moved, since estimates for supply and demand for the current crop year were nearly unchanged in the month. World cotton stocks are projected to increase 8.2% to 110.1 million bales in the current season. Global cotton mill use for 2014-2015, on the other hand, is forecast to rise by 2 percent above last year, to 111.5 million bales. Although China has started to release large portions of the cotton reserves it stockpiled during the buying program in place for several years to support prices, the expected increase in demand for cotton by Chinese mills has not yet materialized. The country is expected to import 7.7 million bales of cotton in the current crop year, over half last-year’s level.

Government policy in China combined with a slowdown in global demand for cotton has resulted in increases in cotton stocks in China and many other countries, which will continue to put downward pressure on prices, according to the USDA.