Cotton prices remained under pressure this week as the eurozone crisis deteriorated, with signs that Germany is the next country to join the drama after a bond auction yesterday failed to lure in buyers.
With global growth threatening to slow down and the world’s largest economy growing slower than expected in the third quarter, fears increase that demand for cotton will weaken – current global cotton inventories are in surplus by 9.8 million bales. Cotton for March delivery touched 89.33 cents a pound earlier this week, the lowest for a most-active contract since September 2010. The soft commodity has already dropped 59% from a record high of $2.197 on 7 March this year.
Experts at the Commission for Agricultural Costs and Pricing announced they expect the price to fall further as the debt crisis unfolds, while Deere, the world’s largest farm-equipment maker, cut its cotton forecast to 88 cents a pound from 90 cents a pound earlier this week. However, separate reports today from China, the world’s largest cotton producer and buyer, said the country may boost imports as the current price of cotton is substantially discounted to the domestic price. This could potentially decrease global cotton inventories, yet increase local inventories which are currently at an estimated 832,700 tons in November. This morning cotton prices were almost 1% higher at 90.71 cents a pound.