Cotton Prices Dropped As ICAC Anticipated Increases In Production For 2024-25.
Cotton candy futures witnessed a slight decline of -0.23%, settling at 61520, attributed to the International Cotton Advisory Committee’s (ICAC) projection of increased cotton production, consumption, and trade for the upcoming season, 2024-25. The ICAC forecasts a 3% rise in cotton-producing area, a 2.5% increase in production to 25.22 million tonnes, and a 2.9% uptick in consumption to 25.37 million tonnes. Additionally, the global cotton trade is expected to grow by almost 4% to 9.94 million tonnes, signalling potential oversupply in the market. The Cotton Association of India (CAI) revised its production estimates upwards for the current season to 309.70 lakh bales, while the China Cotton Purchasing and Storage Corporation (CCPC) raised crop production estimates to 323.11 lakh bales.
Despite increased supply expectations, ICE (NYSE:ICE) prices dropped due to lower demand from mills and higher supply expectations. For MY 2024/25, India’s cotton production is estimated to decrease by 2% to 25.4 million 480 lb. bales, with farmers expected to shift acreage to higher-return crops. However, mill consumption is anticipated to increase by 2%, driven by improving yarn and textile demand in major international markets. China’s cotton imports for MY 2024/25 are forecasted at 2.4 million metric tons due to higher demand for textile and apparel products domestically and internationally.
Technically, the market is experiencing long liquidation with a decrease in open interest by -0.22% and a price decline of -140 rupees. Support for Cotton candy is identified at 61260, with potential downside testing at 61000 levels, while resistance is expected at 61740, with a potential upward movement toward 61960 if prices breach this level. Investors should closely monitor supply dynamics and technical indicators for further insights into market direction amidst changing production and demand expectations.
You’re right, cotton prices did indeed drop recently due to the International Cotton Advisory Committee’s (ICAC) forecast for increased production in the upcoming 2024-25 season [1, 2]. Here’s a breakdown of the situation:
- ICAC’s projection:Â The ICAC anticipates a rise in several areas related to cotton:
- Production:Â A 2.5% increase in global cotton production is expected, reaching 25.22 million tonnes [1, 2].
- Area:Â The cotton-growing area is also expected to see a 3% increase [1, 2].
- Consumption:Â Global cotton consumption is forecasted to grow by 2.9% to 25.37 million tonnes [1, 2].
- Trade:Â Global cotton trade is expected to grow nearly 4% to 9.94 million tonnes [1, 2].
- Reason for price drop:Â The anticipation of this increased supply, particularly with production outpacing consumption, is causing a downward pressure on cotton prices [1, 2].
However, there are some additional factors to consider:
- Lower demand:Â There’s also been a recent dip in demand from cotton mills, which adds to the downward price movement [2].
- Regional variations:Â While overall production is expected to increase, some regions like India might see a slight decrease due to farmers planting more profitable crops [2].
- China’s demand:Â China, a major cotton consumer, is expected to increase its imports due to rising domestic and international textile demand, which could counter some of the supply glut [2].
Overall, the cotton market is reacting to the ICAC’s forecast of increased production in the 2024-25 season, leading to a decrease in cotton prices. However, the interplay of various factors like regional variations and global demand will determine the long-term price trends.