Cotton is one of the oldest materials in human history. Over 7,000 years ago, the human civilization transformed cotton fibers into cloth. It is also considered the staple commodity and the most important material in the textile industry. China is the world\u2019s largest cotton importer, mainly because of its massive population. The country imports more than 7.5 billion dollars\u2019 worth of cotton annually, equivalent to 17% of the global production.<\/p>\n
The price of any particular commodity depends on global supply and demand, and this is especially true for cotton. There are some factors that cause cotton prices to fluctuate, the most important ones being:<\/p>\n
Global stocks: China, the world’s largest oil importer, has been stockpiling large quantities of cotton to ensure that it has sufficient supplies, which has led to a rise in China’s domestic cotton price compared to the rest of the world. If China sells all of its oil reserves, cotton prices are likely to fall.<\/p>\n
Climate: Climate plays an important role in driving cotton prices. Cotton needs warm weather and sufficient rainfall. For example, poor weather conditions in major areas growing in India or China could lead to shortages and high prices.<\/p>\n
Oil prices: Cotton is an expensive material in terms of production, and the machines and vehicles required to operate cotton farms represent an important part of the total costs. These machines and equipment require fuel, and so crude oil prices can significantly affect cotton production.<\/p>\n
USD: Cotton is priced in US dollars and when the dollar depreciates against other currencies, naturally, it takes more dollars to buy cotton. Cotton buyers usually notice that their buying power increases when the dollar is weak and falls when the dollar is strong.<\/p>\n
With the beginning of the new year, the cotton markets showed signs of recovery, amid reports that the China-US trade talks seem more positive than ever before. It has been noted that many textile factories have begun to expand their business, indicating a renewed confidence in the market against the backdrop of positive trade negotiations between the world\u2019s two largest economies. Experts in commodity markets believe this will help revive global trade, which was slowly becoming affected of the possible US-China trade war.<\/p>\n
The United States is responsible for one third of the cotton traded, being the world’s largest cotton exporter. Annually, the US cotton industry generates about $25 billion and provides more than 200,000 jobs. Cotton futures are traded on the New York Mercantile Exchange while cotton futures are traded on the Nymex, all of which have the same delivery dates.<\/p>\n","protected":false},"excerpt":{"rendered":"
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