Executive Summary of the Highlights from the June edition of Cotton This Month:
•The US-China trade war continues to escalate, with increasing retaliatory tariffs on both sides.
•There is an opportunity for de-escalation at the G20 Summit scheduled for late June, but both countries might be preparing for a protracted dispute.
•The tariffs have had an impact on the A Index, which hit a season-low of 76 cents per pound in mid-May.
•Production is projected to outpace consumption in 2019/20, exerting further downward pressure on prices.
Trade tensions and higher stocks add uncertainty to the Cotton Market
The cotton market faces continued uncertainty due to the escalating US-China trade war, with prices under additional pressure due to a projected increase in global stocks.
There is some hope that American and Chinese representatives might be able to de-escalate the conflict later this month when they are together at the G20 Summit in Osaka, Japan. However, the US government recently announced it will provide USD 16 billion in additional support to its farmers, potentially indicating plans for a prolonged standoff.
Prices have suffered from the escalating tariffs, dropping to a season-low of 76 US cents per pound on May 14th. Although global consumption is expected to rise by 1 %, production is expected to jump 7 %, with the resulting increase in global stocks exerting further downward pressure on prices.