Until mid-April cotton prices were trading solidly. Both future and physical prices then fell due to weak demand from China and record levels of US cotton stocks. However, by the end of May and in early June prices appeared to have bottomed out as they began to rise.
The price decreases in cotton combined with high wool prices raised the wool to cotton price ratio to in both April and May.
The end May/early June rebound in cotton prices was in part due to speculation. The speculative demand was driven by trading on redemptions of US cotton from the government loan.
The number of redemptions that occurred was massive as predicted. Demand from the international textile industry remains somewhat disappointing. Many mills bought to cover their needs when prices were lower.
Prices are also likely to have been affected by news the China's domestic cotton supply is exhausted. It is uncertain how reliable estimates of Chinese inventories are and China has released additional import quota for cotton, which will enable increased imports. Prices may remain stable if Chinese mills continue to purchase hand-to-mouth.
Australian Wool Innovation Limited
marketing@alchempro.com
