Agri, industrial commodities have been rising – rubber prices are trading at a 4-month high, cotton is also surging and global cotton prices are highest in the last 10 years.
US is the largest exporter in the world and the stock piles have declined by 4 percent and this is the lowest in a year. US harvest also is down by 6 percent as compared to the average in the last many years and that clearly has been adding premium to prices.
The pent-up demand has come in for cotton as in other commodities also so data from Cotlook also shows that the global deficit could actually double in the next year from where we stand right now, at around 122,000 tonne to around 207,000 tonne in the next year.
The concerns also are coming in from India because of lower sowing, haphazard monsoons this time around. Last year the exports were really strong, the expectation is that in this season the exports could actually decline by 38 percent.
The other reason for the decline in exports on Indian cotton is the higher prices. Indian markets also have seen all-time high levels in case of cotton prices.
Chinese demand is expected to be quite strong and to curb the prices, China also is planning to lend out cotton from the reserves for a second time in this year. So that is another development that the markets will be watching out for.
The cotton prices in the meanwhile, have gained up by nearly a couple of percentage points in the previous week. It is 10 percent up in the last one month and 70 percent up in this year until now, and the markets do believe that this perhaps is a new normal and you will see the cotton prices around these levels for this year and the next as well.