The price of cotton has fallen the most it has in 15 years. Though originally predicted to rise by Texas cotton watchers because of unfavorable weather plaguing the state, the crop remained unaffected and the price fell 4.6%. Furthermore, instead of loosing 50,000-150,000 bales of cotton, the USDA believes that Texas alone will produce 8.9 bales of the fiber. With the US being the world’s largest exporter of cotton, prices rely heavily on how much the US can grow. Even now, there is not enough cotton production as economies is developing countries continue to expand and mature.
As China, the World’s second largest cotton consumers, continues to buy cotton at a rapid rate, the price of cotton becomes more unpredictable and even now the government is having to auction additional bales of cotton. The USDA predicts that at this pace, stockpiles of this commodity in the year 2011 at a 15-year low. Some countries, like India, because this fear of future limited supply of cotton, have slowed down their exporting and have given priority to their own domestic companies who need cotton for their products. These low cotton prices, lower input prices for producers and lower output prices for consumers. Though, once cotton stockpiles are diminished, the price will surely increase.
Countries with a limited supply of cotton will have increased supply inputs costs, while other countries with high cotton resources will gain a competitive advantage because their input costs will be less in comparison. So, for all you producers, buy cotton and lots of it now if you can.
Wall Street Journal
Great job Mia!
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