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Cotton Prices Drop 22 Percent in 2014

Cotton prices edged up slightly in December but remained below the $0.60 mark, according to the U.S. Department of Agriculture. The seven-market U.S. average cotton spot price rose only slightly during the month, from $0.587 to $0.591, but finished 2014 with an almost 22 percent year-to-date decline.

Demand for cotton is being revived by the low prices. Global cotton mill use in the 2014-2015 season is forecast to rise 3 percent above the prior season, to 112.6 million bales.

There still remains tremendous downward price pressure from the worldwide cotton glut, however. Cotton stocks are projected to reach a new record in the current season, rising 6 percent to 108.1 million bales.

China has begun to release large portions of the cotton reserves it stockpiled during the buying program it implemented for several years to support prices. In September 2014, the Chinese government stopped buying cotton from farmers for national reserves, opting instead to give direct subsidies to farmers, and to reduce cotton import quotas in order to stimulate demand for domestic fiber.

Global cotton trade is expected to decline for the second consecutive season, to 34.3 million bales, 16 percent below the prior season.

The latest USDA cotton projections for 2014/15 indicate that global cotton production will be 119 million bales, slightly below the prior season as yield reduction is expected to more than offset increased planted area. Last month, the U.S. cotton crop forecast was reduced by 3 percent last month to 15.9 million bales, 3 million bales above the 2013 crop.