Cotton futures slumped limit down after the US, in a key briefing, ditched expectations of a cut in world inventories as, citing “major macroeconomic concerns”, it slashed its demand forecast.

New York cotton futures for December closed down the exchange limit of 4.0 cents, at 84.86 cents a pound, after the US Department of Agriculture in its monthly Wasde briefing raised by 3.1m bales, to 87.9m bales, its forecast for world stocks of the fibre at the close of 2022-23.

The revision lifted the inventory estimate to a three-year high – in contrast to last month’s forecast, which had envisioned stocks shrinking to a four-year low.

Stocks will be swollen by reduced demand expectations, the USDA said, slashing its estimate for world cotton demand in 2022-23 by 3.0m bales to 115.6m bales – in what it termed “the largest monthly downward revision since May 2020”.

Global cotton consumption is now expected to fall in 2022-23 for the fourth time in five years.

‘Major macroeconomic concerns’

Cotton demand expectations have been undermined by “major macroeconomic concerns, which include higher interest rates from the US Federal Reserve”, as well as cuts by the IMF to its world economic growth forecasts for both this year and 2023.

Much of the demand downgrade attributed to China and India, which with their large textile industries are the world’s top cotton consumers.

However, the USDA reported “lower projected use across major consuming countries” for cotton which, as an industrial commodity, is particularly vulnerable in demand terms to world economic prospects.

‘Have pressured prices’

Indeed, the USDA flagged that world cotton prices had fallen “significantly” over the past month, “as higher interest rates and lower global growth portend economic headwinds”.

“These macroeconomic concerns are expected to lower future consumer purchases for cotton products relative to the previous year and have pressured cotton lint prices.”

Indian values had fallen particularly in the month to Monday, by 29.9 cents a pound to 110.8 cents a pound, with Brazilian prices down by 21.4 cents to 101.4 cents a pound, and US ones sliding by 20.0 cents to 89.1 cents a pound.

The USDA lowered by 6.0 cents a pound, to 90.0 cents a pound, its forecast for average US farmgate upland cotton prices this season, taking the estimate below the 91.4 cents a pound recorded for 2021-22.