Cotton prices – are they in for another trouncing in 2012?


Cotton prices set a record 227 cents a pound in New York in March. But overall, 2011 was hardly a champagne year.

Prices fell 37%, on a spot contract basis, just beating rubber to the title of the year’s worst performing agricultural commodity.

The drop – a stark contrast to the near-doubling in prices in 2010 – was fostered both by an 8% jump in world production to 26.8m tonnes, while consumption fell 2% to 23.9m tonnes, on International Cotton Advisory Committee estimates.

Even so, prices remain, at about 95 cent a pound, historically high. Will they hold on in 2012?


“Prices are unlikely to reach the levels seen before planting in spring 2011 again in the foreseeable future.

Commerzbank forecasts for New York cotton price, 2012Q1: 95 cents a pound

Q2: 105 cents a pound

Q3: 110 cents a pound

Q4: 110 cents a pound

Forecasts for average price, near-term contract, during the quarter

Year average: 105 cents a pound, (137 cents a pound in 2011)

“While the US Department of Agriculture has only revised down global supply estimates by a good 300,000 tonnes since the first forecasts for 2011-12 were issued in May, it has reduced its demand forecast by almost 2m tonnes, and the expected supply surplus is therefore set to be significantly higher at 2.6m tonnes.

“A sharper fall in price will be prevented by strong Chinese import demand. State authorities are currently buying cotton on the domestic market at the equivalent of 140 US cents a pound and thus at significantly higher prices than on the world market.

“Given the only moderate [world economic] growth prospects for 2012, which are also likely to result in demand for cotton fibres largely stagnating, we do not expect the supply situation for cotton to tighten next year, which would lead to massive price increases.

“If the headwind from the financial markets abates and the global economy recovers as we anticipate during the course of 2012, the prospect of lower acreage would point to a cotton price recovery.”

Morgan Stanley

“We see cotton prices coming under further pressure through the first half of 2012 as demand for US exports falls by 17% year on year in 2011-12.

Morgan Stanley forecasts for New York cotton price

2011-12 average: 100 cents a pound

2012-13 average: 80 cents a pound

Forecasts for near-term contract

“The continued flow through of 2011’s record prices, coupled with a mediocre growth outlook in most developed markets continues to slow retail sales.

“Chinese reserve purchases should provide some support to the market through March.US cotton prices have been remarkably rangebound since the programme was introduced in September.

“However, as the domestic harvest ends and Chinese purchases tail-off, we expect further weakness in world cotton prices, and perhaps even a stream of US export cancellations, as China’s cotton traders seek cheaper regional alternatives.

 “We see weaker lower cotton prices limiting planted acreage in 2012-13 and as a result world 2012-13 cotton harvested area is seen flat year on year, with lower US abandonment rates preventing a more pronounced year on year decline.”


“In 2012, we expect the global cotton industry to be under pressure and prices to fall due to the largest global cotton crop ever, and stagnant demand.

Rabobank forecasts for New York cotton price in 2012Q1: 85 cents a pound

Q2: 85 cents a pound

Q3: 80 cents a pound

Q4: 80 cents a pound

Forecasts for average price, near-term contract, during the quarter

“Downside price movements will be tempered in the first quarter by the battle for acres in the northern hemisphere growing regions and concerns about the impact of dryness on US plantings.

“As a consumer good and not a food product, cotton is more susceptible to economic downturns than the rest of the agri complex, and this was evident in price movements during the past recessions.

“Cotton demand will be squeezed on both sides in 2012 as high prices for the fibre in the past season resulted in higher-priced yarn and textiles; high unemployment and concerns about household incomes have also resulted in increasingly cost-conscious consumers.

“The increase use of synthetic fibres worsens the cotton outlook further. Synthetic fibre production in China, the largest producer, is forecast to have reached a record high in 2011. In 2012, synthetic fibre will come under the same pressure as cotton as the apparel industry faces reduced demand growth. “

Standard Chartered

Standard Chartered forecasts for New York cotton price, 2012Q1: 110 cents a pound

Q2: 115 cents a pound

Q3: 110 cents a pound

Q4: 100 cents a pound

Forecasts for average price, near-term contract, during the quarter

Year average: 109 cents a pound