Cotton Prices Forecasted to Fall

Worldwide cotton production is poised to rise in the 2017-18 growing season, while prices are expected to drop. That’s according to the International Cotton Advisory Committee (ICAC), which predicts cotton-growing countries will collectively produce 23.1 million tons of the crop – a 1% increase over 2016-17. In its first forecast for next season’s average price, the ICAC put the average per-pound cost of cotton at 73 cents – a 5-cent decline from the current year, but still more than the multi-year low of 70 cents experienced last season.

Cotton prices are significant to the promotional products industry given the starring role branded apparel plays in the marketplace. Yet short-term changes in cotton pricing don’t have the same effect on what distributors pay as they used to.

“While we always watch cotton closely, moves in the commodity markets impact our industry less than they used to,” says Norm Hullinger, CEO of alphabroder (asi/34063). “After the last cotton ‘run up,’ all of the major players – Gildan (asi/56842), Fruit of the Loom (asi/84257), Jerzees (asi/40650), Hanes (asi/59528) – have taken more long-term positions and hedge much more than they used to. Also, a typical T-shirt has only a half-pound of cotton. Small fluctuations will have a nominal impact on our pricing.”

In the 2017-18 growing season, the ICAC projects that India will produce 5.9 million tons of cotton, a 2% rise from the current year. Meanwhile, production in China could top out around 4.8 million tons as planted area expands by 3% following five years of contraction. In the U.S., production is predicted to stay steady at 3.8 million tons.

Worldwide, the ICAC projects that cotton mill use will rise from an expected 24.1 million tons this growing season to 24.4 million tons in 2017-18. The anticipated decrease in cotton prices and a strengthening global economy could propel the uptick in mill use.