Prices Might Be Influenced by More Than Traditional Market Fundamentals


For Immediate Release 
Date Posted: 3 May 2021
Executive Summary
Highlights from the May 2021 Cotton This Month include:

  • Global production for 2020/21 is estimated at 24.6 million tonnes, led by India
  • Global consumption is estimated at 25 million tonnes, led by China
  • Trade is estimated at 9.8 million tonnes
  • Those fundamentals would typically support an increase in prices but other factors are at work too:
    • Trade disputes among major players continue and
    • US restrictions on cotton from Xinjiang could put stress on global supply chains and their lack of transparency

Prices Might Be Influenced by More Than Traditional Market Fundamentals
They are called ‘fundamentals’ for a reason: because certain factors have proven themselves over time to be fairly consistent predictors of marketplace behaviour. But they are by no means a guarantee of near-term price fluctuations because other factors can push the market away from what the fundamentals might appear to indicate.

Today the industry finds itself in that very situation. If, as expected, global cotton production in 2020/21 (estimated at 24.6 million tonnes) is unable to keep pace with global consumption (estimated at 25 million tonnes) and worldwide trade remains healthy (estimated at 9.8 million tonnes), that combination of factors normally would be expected to drive an increase in price.

However, ongoing trade tensions between the USA and China likely will continue to have an impact on prices, and the recently announced US restriction on cotton from Xinjiang — which produces about 90% of China’s cotton lint each year — complicates the outlook as well. If fully enforced, the restriction would place a very difficult burden of proof on companies throughout the long and complex cotton supply chain.

In terms of prices, The Secretariat’s current projection for the year-end 2020/21 average of the A Index has been revised to 80 cents per pound this month. The price projection for the year-end 2021/22 average of the A Index is 89.7 cents per pound this month. 
Cotton This Month is published at the beginning of the month with the Cotton Update published mid-month. The Cotton Update, which is included in the Cotton This Month subscription, is a mid-month report with updated information on supply/demand estimates and prices. The next Cotton Update will be released on 17 May 2021. The next Cotton This Month will be released on 1 June 2021.
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Please contact the author, Ms. Lihan Wei, with questions on this report.

About the International Cotton Advisory Committee (ICAC)
Formed in 1939, the ICAC is an association of cotton producing, consuming and trading countries. It acts as a catalyst for change by helping member countries maintain a healthy world cotton economy; provides transparency to the world cotton market by serving as a clearinghouse for technical information on cotton production; and serves as a forum for discussing cotton issues of international significance. The ICAC does not have a role in setting market prices or in intervening in market mechanisms. For more information, please visit