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Global Impex USA predicts cotton prices will come down in spring

Posted February 11, 2021

 

As industries worldwide grappled with COVID-19 in 2020, the textile industry was no different.

 

The dwindling cotton supply due to the decreased output of cotton mills around the world led to steadily increasing cotton prices globally over the last year (see chart above), according to a recent report by Global Impex USA. This decreased supply, paired with high demand for cotton-based medical garments, only exacerbated this issue. Additionally, as demand began to resume worldwide in the second half of 2020, this imbalance between supply and demand further pushed global cotton prices higher.

 

However, looking forward to 2021, many mills will be up and running at full capacity sooner rather than later.

 

As vaccines have begun to roll out worldwide and the outlook of the deadly pandemic has brightened in recent weeks, mill production is expected to rise as workers can gradually begin to come back and work together and safely. According to a USDA report from January 2021, global cotton mill use is expected to rise by over 13% year over year to an expected 115.7 million bales. Although this is a large jump year over year, this production level is still less than each of the three preceding years prior to 2020.

 

Even with this rise in a production, put in perspective, it is still undeniable that the equalization of supply and demand worldwide will lead to prices trending down in 2021. Especially once vaccine distribution begins to become more widespread outside of industrialized countries, production may begin to move back to levels that would have been expected in 2021 if the COVID-19 pandemic and its related economic disruption did not occur.

 

Looking into the markets, cotton futures have continued to rise for the immediate future and are trading around 85 cents per pound. March futures are currently trading around 81 cents per pound and May futures around 82 cents per pound. However, both have been trending down from the highs of 85 cents/per pound in recent weeks.

 

These technical indicators cannot be ignored, and they point to a short, but continued price rally that is expected to cool off simultaneously with the cooldown of the virus’s effects, just as the northern hemisphere comes out of winter. It is undeniable that the pandemic is still the most important factor in deciding near future cotton prices so monitoring its progress, especially with the emergence of new variants, is extremely important for anyone paying attention to the cotton market.

 

However, without a shadow of a doubt, the production and distribution of vaccines have opened the door to the possibility this pandemic may be largely behind us by late Spring 2021, and futures markets are beginning to reflect this trend of optimism. This trend is reflected in the associated chart made using exponential smoothing to create a forecast over the coming months (see chart below)

 

Additionally, textile industry veteran and Global Impex USA co-founder King Mukherjee said he believes that cotton prices will begin to cool off around April or May as production finally begins to catch up with demand. This coupling of market indicators and expert intuition and experience allows the industry to investigate the future with confidence that global cotton prices should lower and stabilize in the coming months.

 

Global Impex USA is a mill-direct company specializing in custom fabric resources. The company produces large quantities of industrial and artist canvases, medical scrubs and textiles, merchandise apparel, and many more custom resources for clients looking for the highest-grade material and sustainable products.

 

Global Impex USA has recently advanced into providing level 2 Food and Drug Administration (FDA) approved gowns and domestic gowns fabrics under The Berry Amendment. Furthermore, despite the rise in cotton prices, our company continues to provide high-quality products waging at 2020 prices for our clients.

 

Source: Global Impex USA

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