Cotton futures hit a 22-month low, even as Cotlook underlined the threat to demand from economic slowdown as it doubled its forecast for the world production surplus on a lower consumption forecast.
New York cotton futures for December eased by 1.4% to 74.08 cents a pound in early deals in New York, hitting the lowest level for a spot contract since December 2020, and extending a decline spurred by deteriorating world economic forecasts.
Cotton, which as an industrial commodity is particularly vulnerable among ags to broader market sentiment, has now lost 37% over the past two months on a December contract basis.
The impact of the weaker economic outlook was underlined on Friday by Cotlook, which downgraded by 630,000 tonnes (2.9m bales) to 23.81m tonnes (109.4m bales) its forecast for world cotton consumption in 2022-23, as started in August.
“Consumption has been lowered substantially, as a result of changes for almost all of the principal consuming markets,” the UK-based analysis group said.
Of the demand estimate revision, 270,000 tonnes related to the Indian subcontinent, where consumption was now seen falling for a second consecutive season, to 9.27m tonnes.
The figure for consumption by China – which is under particularly scrutiny, for evidence of the economic impact of Covid lockdowns – was cut by 150,000 tonnes to 7.45m tonnes, also putting a year-on-year decline on the cards.
Vietnam, the fifth-ranked consuming country, where consumption had been expected to hold steady this season, also received a notable demand downgrade, of 100,000 tonnes to 1.25m tonnes.
The changes fuelled an increase to 995,000 tonnes (4.6m bales) in Cotlook’s forecast for growth in world cotton stocks this season, from a previous estimate of 452,000 tonnes (2.1m bales).
‘Still worried about demand’
The revisions tally with those unveiled earlier in October by the US Department of Agriculture, which made its biggest monthly downgrade to its world cotton demand hopes since the depths of the Covid pandemic, sending futures tumbling.
Concerns have been stoked by a soft start to 2022-23 for demand for US exports, with importers’ upland cotton commitments – completed exports and unfulfilled orders combined – at a five-year low of 8.44m running bales so far.
Chinese commitments, at 1.78m bales, are down 30% year on year.
“The trade is still worried about demand moving forward due to recession fears and Chinese lockdowns,” said Jack Scoville at broker Price Futures.
“It is possible that the continued Chinese lockdowns will continue to hurt demand for imported cotton for that country and that a weaker economy will hurt demand from the rest of the world.”
Prices have also felt some pressure from reports of better-than-expected results from the ongoing US cotton harvest.
The Cotlook A index of physical values stood at 95.25 cents a pound as of Thursday, down by nearly one-quarter since the start of September.