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Home News Cotton Market Should be Stable in 2025 – Good News for the Global Economy

Cotton Market Should be Stable in 2025 – Good News for the Global Economy

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Cotton Market Should be Stable in 2025 – Good News for the Global Economy

New York – Cotton may not always be a leading indicator for the global economy, but a new report from Cotton Incorporated suggests that there’s a link between the two and that both are headed in the right direction for 2025.

In its just released special study, “Cotton As A Possible Bellwether for Global Economies: Why International Cotton Markets Matter,” the organization, a sister body to Supima, reports “The overall economic outlook (in the U.S.) is favorable, and the outlook for cotton pricing is seeming to head in a positive direction.”

Cotton Incorporated is forecasting more stability in cotton pricing for the new year, stating “The bottom on pricing should be pretty close in terms of fiber prices. After incessant volatility since the onset of the trade dispute and the spread of Covid-19, the outlook suggests a more stable macroeconomic environment. That stability may be coming at the expense of slower growth, but it should also enable a greater ability to plan.”

If you use the cotton market as an overall economic bellwether, the group said, “Alongside a more stable business environment, the cotton market has calmed. This has been a product of additional supply coming onto the market, and that supply will take some time to work through. This suggests that raw cotton costs should remain attractive and stable, enabling more predictability around sourcing costs.”

Cotton Incorporated projected how each of the major cotton producing nations around the world are looking at their crops for 2025. The U.S. Department of Agriculture expects 2024/25 will see an increase in global production (+3.1.2 million bales to 116.2 million) and world mill-use (+1.4 million to 115.2 million).

“The biggest year-over-year increase is expected to come from the U.S., which has seen an increase of about 2.5 million more bales than last year. But the increase only seems so big because in 2023, the U.S. market saw its smallest crop since the 1980s.”

Weather has been the main culprit in smaller crops with hot and dry conditions in West Texas, the largest growing area in the country.

China remains the world’s largest cotton producer, the report said, and its production increased 300,000 bales to 27.8 million last year. China also has a reserve stock that was brought in last year, making the country’s market well supplied moving into the 2025 season. This means China is decreasing its imports by 500,000 bales to 9.5 million.

The report also cited the housing market crisis in the country. “We’ve seen housing prices there decrease anywhere from 15% to maybe 20%, so that’s a big impact on the household finance situation in China because an estimated 70% of Chinese wealth is in the housing market. And if household finances aren’t looking good, they’re going to be less likely to spend. We are seeing some stimulus come out in China, but nothing really in comparison to what was released in the U.S. and Western markets with Covid. We’re probably not going to see the strength of consumer demand that we’ve seen in the past couple of decades.”

India is the second largest cotton grower in the world and the report said the country also had issues with weather over the last few months and its crop numbers are getting smaller.

“However, India’s minimum support price (MSP) guarantees to growers over the past several years. When prices were higher and above the guaranteed price, it wasn’t a problem. But now that prices are lower, the Indian government will likely need to step in, as the MSPs are enforced by the government. This also means the government would take possession of the cotton and withhold it from the market. But unlike in China, where cotton can be stored for years, storage in India is usually for just a period of months. The cotton may come back on the market only to be sold at a loss.”

In Pakistan, the fourth largest grower, cotton production has seen a decrease of 300,000 bales to 5.7 million, but its spot prices increased from $0.76 to $0.81 cents per pound.

“Pakistan had issues with their cotton seeds. They haven’t had the best controls, so they have lost some of that protection over time. They’ve also had issues with flooding. And the financial situation as a whole isn’t great in Pakistan. Also, the weather has been really hot to the point that at times this year, temperatures were about 120 degrees. So, they have had challenges on several fronts.”

The wild card for 2025 could be Brazil, which had a record crop last year and has the advantage of being able to plant two crops a year due to its tropical climate. Elsewhere in the world, cotton can only be planted once a year.

“Over the past 10 years or so, farmers have planted two crops on the same land within the same year. For instance, they can plant soybeans, harvest them and then plant corn or cotton right after that, increasing production in their acreage without increasing their acreage. Since Brazil has so much to export, its prices dropped into the spring, which drove down prices on U.S. cotton.”

The U.S. cotton crop for 2025 will be planted starting in April and that’s when more accurate forecasting is likely to be in place. But based on the most recent forecasting models cotton should be more stabile over the coming year.