THERE has been a strong bounce in cotton prices over the past two months following a depressed period in pricing which saw cotton contract hit lows last seen seven years ago.
Trading supervisor at Namoi Cotton Pedr Harvey said February cotton prices were the lowest since February 2009, but said some potential shorts in the market had led to the rally, which has seen prices kick some $20 a bale.
As the pickers roll down into NSW, Mr Harvey said feedback regarding this year’s Australian cotton harvest was that yields were slightly up year on year, but total production would be back due to lower plantings.
Internationally, Commonwealth Bank commodity analyst Tobin Gorey said cotton futures had come back slightly in the past week after the International Cotton Advisory Committee (ICAC) upped its forecast for next season’s global output.
ICAC predict the area planted to cotton will lift one per cent and yields will jump 4pc, seeing 2016 production 4pc higher.
Mr Harvey said this was in line with what he had been hearing.
“Even with cotton futures lower than last year, US growers are increasing their plantings,” he said.
“This is because cotton’s gross margin appears more attractive than competition crops even at lower values.”
Mr Gorey said he did not see the recent rally adding long term fire to the market.
“I see cotton’s recovery of late hinging more on technical factors and believe prices will remain low throughout the 2016 season.”
Mr Harvey said one reason for the rally had been Chinese government policy.
“The delay in China making its announcement on their selling programme for the coming year has seen some speculators cover their short position in recent weeks,” he said.
Mr Harvey said the Australian crop was about 60pc sold leading into harvest.
