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Cotton Prices Plunge 7% in May

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After rising slightly in the first few days of May, cotton prices spent the following three weeks dropping at a rather alarming rate after demand from China fell off. The seven-market U.S. average spot price ended the month down 7 percent, at a price of almost $0.80 per pound.

The decision by Chinese officials to allow its state reserves of cotton to be sold in higher quantities and at lower prices than previously stated resulted in a sharp decline in demand for imported cotton. According to the China National Cotton Information Center, the country’s cotton imports fell 44 percent in the first quarter of 2014.

The U.S. Department of Agriculture issued its first projection for 2014—2015 cotton production, which calls for larger crop output. Well-timed rainfall in West Texas, the largest cotton-growing region in the country, helped the planting cycle get off to a good start. It also estimated that rising cotton inventories outside of China will continue to put downward pressure on prices.

Bangladesh, Turkey and India reported rising cotton imports. India’s prices, though higher than in recent months, remained attractively priced from a global standpoint because of the weak rupee for most of the month, but prices weakened in the last week due to apparent stockpiling by ginners. In Pakistan, cotton demand and pricing rallied early in the month, but then weakened a bit as demand and pricing declined everywhere else.

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