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Monthly Cotton Economic Newsletter: January 2025
SJ Guest Editorial
5 min read
Recent Price Movement
Movement in cotton benchmarks was mixed, with some values flat, decreasing or rising over the past month.
The nearby March ICE/NY futures contract traded sideways for much of the past month. After declining from 74 to just below 68 cents/lb between late November and the second half of December, values have held in tight range between 68 and 70 cents.
The A Index was flat to marginally lower over the past month, easing from 80 to 78 cents/lb.
The Chinese Cotton Index (CC Index 3128B) decreased from 95 to 90 cents/lb. In domestic terms, prices fell from 15,200 to 14,600 RMB/ton. The RMB weakened against the dollar, from 7.28 to 7.33 RMB/USD.
Indian spot prices (Shankar-6 quality) were steady around 81 cents/lb. In domestic terms, values held near 54,000 INR/candy. The INR was stable around 85 INR/USD.
Pakistani spot prices increased from 75 to 81 cents/lb over the past month. In domestic terms, values dropped from 17,300 to 18,500 PKR/maund. The PKR was steady at around 278 PKR/USD.
Supply, Demand & Trade
The latest USDA report featured a sizable change in global production (+2.1 million bales, to 119.5 million) and a marginal update for mill use (+100,000 bales to 115.9 million). There were no revisions to figures for preceding crop years and, therefore, no change to world beginning stocks (flat at 74.2 million bales).
The net result for global ending stocks was a +1.9 million bale increase to 77.9 million. If realized, this volume would be the largest volume of world stocks since 2019/20 and a +3.7 million bale increase year-over-year.
The increase in world production was driven by an addition to the Chinese crop number, which was lifted +1.8 million bales, from 28.2 to 30.0 million. The current estimate for the Chinese crop suggests the highest production since 2022/23 (30.8 million bales) and represents only the second time over the past decade when Chinese harvest has been 30 million bales or more (it was as low as 21.4 million bales in 2025/16).
Outside China, the largest changes to harvest estimates were for Australia (+400,000 bales, to 5.4 million), Pakistan (-300,000 bales to 5.2 million), and the U.S. (+159,000 bales, to 14.4 million).
For mill use, the largest changes were for Bangladesh (+100,000 bales, to 7.9 million), Vietnam (+100,000 bales, to 7.1 million), and Turkey (-100,000 bales to 7.0 million).
The global trade forecast increased +200,000 bales to 42.5 million. In terms of imports, the largest changes were for China (-500,000 bales to 8.0 million), Turkey (-100,000 bales to 4.2 million), Bangladesh (+100,000 bales to 7.8 million), Vietnam (+100,000 bales to 7.1 million), India (+300,000 bales to 2.6 million), and Pakistan (+300,000 bales to 4.8 million). For exports, the largest changes were for the U.S. (-300,000 bales to 11.0 million), Australia (+100,000 bales to 5.5 million), India (+100,000 bales to 1.4 million).
Price Outlook
An old saying in commodity markets is that the best cure for low prices is low prices. The reason is that lower prices can discourage planting and production while potentially encouraging demand. A question for the market as the Northern Hemisphere approaches the period for planting decisions for the forthcoming 2025/26 crop year is how true this old saying might be.
The world’s two largest producers, China and India (estimated to represent 45 percent of global production in 2024/25), have significant government price support systems. This can create insulation from market forces and may limit shifts in planting in these countries in 2025/26.
In countries with less robust government support, growers are grappling not only with lower cotton prices, but also with a lack of attractive options. Corn and soybeans are traditional competitors for cotton acreage. Prices for both of these crops are also down significantly relative to where they have been in recent years (in terms of U.S. nearby futures in January, corn is near the level from last year but is down -31 percent relative to 2023, soybean prices are down -34 percent relative to 2023 and down -19 percent year-over-year, cotton prices are down -19 percent relative to 2023 and down -17 percent relative to last year).
For the U.S., statistical models based on ratios of cotton prices relative to other crops suggest only a modest change in plantings for 2025/26. Results from a recent survey of U.S. cotton producers aligns with these projections, suggesting only a 5 percent decrease. Beyond prices, costs of production may also influence U.S. planting decisions for the upcoming crop year.
The combination of lower prices and higher production costs present the first major profitability challenge that Southern Hemisphere growers have faced since scaling up production in recent years. Growers in Brazil and Australia have some opportunity to observe the market after Northern Hemisphere planting before making their acreage allocations. However, soil and climate conditions (Australia) as well as the lack of attractive alternatives (prices depressed for second-crop or safrinha corn production in Brazil) may keep them in cotton.
This suggests that the record volume of exportable supply from these major shippers in the current crop year could be maintained or expanded in 2025/26. Meanwhile, China is collecting a large harvest in 2024/25 and accumulated a significant amount of foreign stocks through heavy imports in 2023/24. Since China has ample domestic supply, it does not have a strong need for imports. A result could be that the large volume of exportable cotton may have to continue to compete for limited global import demand, which may continue to weigh on prices.
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Jon Devine, senior economist at Cotton Incorporated, keeps key stakeholders in the textile and investment communities informed via timely market analyses of commodity economics and factors influencing their stability. He generates industry analyses of the various links on the cotton supply chain, contributing to the division’s examinations and reports on consumer and retail trends relevant to cotton textile and apparel sectors.
For more economic information about the cotton market, visit Cotton Incorporated’s Lifestyle Monitor.
