Lower supply may lift cotton prices in 2013: Analysts

2013-1-11

The prices of cotton may see an increase if world cotton supply falls below demand in 2013, according to industry analysts.

 

The year 2012 saw cotton performing badly among agricultural commodities and cotton futures dipped by about 18 percent. Secondly, world cotton inventories at the close of 2012-13 season are expected to be at record high levels.

 

These two factors may cajole farmers to shift to other crops, resulting in lower supply of cotton and in turn lifting the prices in 2013, opine analysts.

 

The upside potential of cotton prices is limited in the medium term, agrimoney.com said quoting Commerzbank. The bank expects a marked reduction in cotton acreage in favour of soybeans in 2013-14 season, mainly owing to low cotton prices during the current season.

 

According to Commerzbank’s analysis, lower supply of cotton may result in market deficit for the first time in four years, which would give a moderate lift to prices.

 

Global financial services firm Morgan Stanley says the market prices of cotton will be increasingly driven by new-crop supply uncertainties in 2013. The firm foresees at least 30 percent year-on-year decline in cotton acreage in Australia and Brazil.

 

As per forecasts of Rabobank, global cotton prices will remain stable in the first half of 2013, owing to oversupply in the market. The financial services provider expects global cotton area to contract by 6 percent in 2012-13 and an additional 9 percent in 2013-14.

 

But, the policies and interventions of the Chinese Government would much influence the cotton price trends in 2013, as around 46 percent of world ending stocks are located in China, Rabobank said.

Source:Fibre2fashion