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Cotton Prices on the Move in August

Cotton prices rose steadily for the first three week of August, but then dropped in the final days of the month, ending at a price about level with July.

According to data from the U.S. Department of Agriculture (USDA), the seven-market U.S. average cotton spot price rose by more than three cents per pound between July 31 and Aug. 21, but then declined by the same amount in the next five trading days, to $0.6089. This follows a $0.06 per pound drop in July.

The sharp increase in spot prices in the first few weeks of the month may have been a result of the USDA’s downward revision to its global cotton production forecast and a slight increase in historical mill-use levels.

Also during the month, the Chinese government implemented the biggest devaluation of its currency since 1994. The decline in the value of the yuan lowered the value of the CC index by $0.03 per pound.

The cotton production estimate for the 2015-2016 season dropped by 2.5 million bales to 109 million, while mill-use increased by 200 thousand bales to 114.6 million.

Also these resulted in a 2.9 million bale reduction to the forecast for ending stocks, to 105.2 million, the amount of cotton expected to be warehoused around the world remains high by historical standards.

The increase in mill-use estimates was largely due to an adjustment made to the forecasts of expected mill-use by Bangladesh, Taiwan and Turkey, partially offset by decreases in China, India, Pakistan and Vietnam.