Cotton futures posted their largest monthly decline since September 2022 last month, falling 15.7 percent to close September at 0.7852 dollars per pound. The slide followed a peak of 0.9374 dollars reached in August.
Rates and growth concerns
Zafer Ergezen, futures and commodities market expert, said one of the biggest reasons for the decline was concern about global economic growth. He said expectations that high interest rates would slow economic growth also raised concerns about reduced cotton demand.
Ergezen said the timing of the cotton price decline coincided with the period when the Federal Reserve raised interest rates. Cotton had started the year near 0.60 dollars a pound and had gained as much as 30 percent year-to-date before the reversal. In January alone prices had fallen 1.7 percent.
Owen Wagner, Senior Grains and Oilseeds Analyst at Rabobank, said it is a generally accepted rule that cotton demand requires global GDP growth of 3 percent. He said that given high energy prices, international organisations’ forecasts indicate a notable increase in cotton demand this year will be difficult.
Supply and buyer behaviour
Ole Hansen, Head of Commodity Strategy at Saxo Capital, said cotton prices had earlier risen on higher oil and petrochemical prices, a deteriorating US cotton crop, and expectations of Chinese buying. He said shrinking yarn production margins, weak orders and abundant cheap Brazilian cotton had made textile producers reluctant to buy at high prices, and that demand from China failing to meet expectations added further pressure on cotton prices.
El Nino and reduced monsoon rainfall in India were said to have hurt cotton supply, with effects felt since the start of the year. Ergezen attributed the earlier high cotton prices this year to expectations of rising cotton demand versus polyester, as oil prices had stayed elevated. By comparison, cotton’s monthly fall in September 2022 had reached 24.6 percent.
Related: Wheat drops 12.7% in September, its sharpest fall since 2024
Source: Federal Reserve
