6. February 2017 / Commerzbank: „Cotton price increase was recently driven strongly by speculations”

The Commerzbank analyses the cotton price development in its newsletters on commodities of January 30 and February 2. According to this, the cotton price is currently enjoying support from an amazingly strong Chinese demand for US cotton. Moreover, the net-long-positions of market participants that are focused on short terms rebounded after a short decrease from its record level.  Market participants thus pin their hopes on continuously rising quotations. The anticipated second shortfall in a row on the cotton market in 2016/17 is an important factor. Yet, the deficit was estimated lower at last than in previous months, and considerably less than half of the previous year. Cotlook, the home of analyses, recently reduced its deficit estimates from 1.6 to 1.2 million metric tons. Furthermore, a growing number of surveys disclose that US farmers intend to expand their cotton area in 2017/18 considerably. Hence, there are definitely some reasons arguing against a further price increase. 

Nevertheless, the cotton prices are continuously on the rise in the short-term. The futures contract which is due next registered a further price increase of 2 percent on February 1. Cotton was quoted at more than 77 US-cents/lb on February 2; thus, cotton is as expensive as it used to be almost six months ago. According to Commerzbank analysts, the weaker US-dollar is the inflating factor. Moreover, market participants believe that purchases ahead of the expiring March-futures contract are responsible for the price increase. The cash scarcity in India is obviously still playing a role as well leading to retaining supplies.

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