2024-02-27 23:59:45
Cotton prices are on the rise and have just returned to a level that had not been reached for a year and a half. An increase that is difficult to explain, because demand has not yet really recovered.
20% increase over the last two months: industry players are the first to be surprised by the performance displayed on the cotton market. The price increase is even inexplicable », confide certain experts in the sector, given the current balances between consumption, production and global stocks. What we call the “physical” market, that of cotton harvested in the fields, seems disconnected from the financial market, from the “paper” market, as we say in the jargon.
Comfortable production
Production is in fact largely capable of meeting consumption which is still suffering: even if January exports from Bangladeshi factories could announce a recovery in world demand, this has not yet been confirmed and if it was the case, it could without problem be fed by the Indian harvest, but also by the one to come in May in Australia, and by that expected in July in Brazil, which looks more than reassuring, without forgetting the African production well on its way to recovering.
An increase fueled by speculators
If market fundamentals do not explain the rise in prices, the answer lies elsewhere. We are faced with “ a purely speculative, purely technical phenomenon », summarizes a trader, who points out the role of Anglo-Saxon, and in particular American, speculative funds which are currently agitating on the market.
The latest American harvest, lower than the previous one, is already largely exported and creates a feeling of shortage, even though there is cotton elsewhere. “ We find ourselves trapped in reduced American production “, which drives up prices on the New York Stock Exchange (ICE), but also, by extension, international prices, explains our interlocutor who today says he is a “hostage” of his funds.
Attractive prices for producers
These rising prices complicate the task of trading houses, which today must buy at prices that continue to rise, “ without guarantee of being able to sell », Explains one of their representatives: a situation which involves taking greater financial risks than usual. Current prices are also weighing on spinning mills, the price of yarn having not increased as much as that of the cotton they must buy.
The context, on the other hand, benefits producers and in particular those on the African continent. Even if the cost of cotton has become very high, the rise in prices is today welcomed with a smile, and motivates African cotton companies to sell their harvest.
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