Speculation, not fundamentals, driving higher cotton prices: ICAC

The actions of speculative buyers have significantly increased the demand for futures contracts, ultimately exerting an upward force on cotton prices, ICAC noted in a recent release.

A common pattern emerges as speculators invariably attract additional participation in the market, creating a feedback loop that escalates buying pressure, and consequently, prices.

The real story will start to unfold in the next few months when planting intentions are solidified, at least in the Northern Hemisphere, the ICAC report noted.

Planting intentions have been lower than in previous years, and it remains to be seen whether the recent higher prices will incentivise farmers to raise the area under cotton cultivation.

If the planted area remains below previous seasons' levels, and consumer sentiment improves—thus driving demand up in the 2024-25 cotton season, then higher prices can be certainly expected, especially given the lower stocks in many of the largest countries.

The ICAC secretariat’s current price forecast of the season-average A-index for 2023-24 cotton season ranges from 83.5 cents to 102.3 cents, with a midpoint of 91.73 cents per pound.

Fibre2Fashion News Desk (DS)