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Cotton Prices Rise in September, but Spinners Remain Cautious

Cotton prices dropped in the first week of September and then steadily increased throughout the month, finishing 4% higher in the four week period ending September 27.

Expectations of continued stockpiling in China and concerns over weather and the US crop yield continued. Weakness in the U.S. dollar due to continued Fed stimulus resulted in additional upward price pressure in U.S. dollar terms, as did the rebounding of both the Pakistani and Indian currencies.

The seven- market U.S. average spot price rose by three cents in September, finishing the month at 83 cents per pound, 17% ahead so far this year and 27% higher than year-ago levels.

Yarns spinners are reportedly curbing their orders due to softening demand and an inability to raise price, hoping that as the new season’s harvest begins shipping in the coming weeks, prices will settle down.

However, commodities forecasters expect global production to fall in the coming year, with increased production in Brazil expected to not quite offset the expected steep declines in the U.S., China and Turkey.  U.S. cotton production for the 2013-2014 season is forecast to drop by as much as 25% due to dry weather back in the Spring and more attractive prices of other crops.

Demand for cotton, while strong in India and surrounding countries, remains flat in China and the U.S. others. Skittishness regarding global economic health, and a strong synthetic cycle in U.S., Asian and European fashion is depressing cotton demand. How long that continues will go a long way toward determining future price movements.