Cotton price rises to 4yr high
Cotton price rose to 85.5 cents per pound, the highest in four years, mainly because of a looming trade war between the US and China, much to the chagrin of Bangladesh's apparel makers.
Even a month ago, cotton was traded between 83 cents and 84 cents a pound in the international markets. Cotton was traded between 70 cents and 71 cents a pound in November.
“Yes, this is the highest price in the last three to four years,” said Mehdi Ali, president of Bangladesh Cotton Association (BCA).
Since the Chinese government in April announced potential 25 percent retaliatory tariffs on US goods, many in the cotton industry have wondered about the consequences, according to a report by the California Apparel News.
If implemented, the tariffs would affect about $50 billion in goods, $16.5 billion of which includes crops and food items the US sends to China, it said.
Mohammad Ali Khokon, vice-president of the Bangladesh Textile Mills Association, said, “It was our prediction that the price of cotton will go down this year, but we have been proven wrong as the price has started going up.”
“If the cotton price goes up in the international market, our cost of production will go up further,” he said.
According to Ali of the BCA, cotton price went up in the international markets also because of volatile political situation in the world, currency fluctuation and stockpiling of the raw material by major global traders.
“If the price spiral continues, Bangladeshi importers might face troubles as almost all the demand of the raw material is met through import in absence of domestic production,” he said.
Local growers can meet only 3 percent of the local demand for cotton while 97 percent is imported mainly from India, the US, the Middle Eastern countries and some African countries.
Annual cotton imports stand at more than $3 billion. Bangladesh is the largest cotton importer in the world as China stopped importing the widely consumed white fibre.
Bangladesh's cotton import will creep up to 7.1 million bales in 2017-18, further consolidating its position as the world's largest importer of the fibre, according to the United States Department of Agriculture.
Bangladesh is over-dependent on India and imports 35-40 percent of cotton from the neighbouring country.
According to a report on cotton by the USDA in May, the world's ending stocks forecast of cotton was down slightly for 2018-19. However, stocks outside of China will increase for the third year in a row and reach a record at just over 50 million bales.
Ending stocks are forecast to increase in nearly all major producing and consuming countries as global production remains high relative to consumption. Global consumption is forecast at a record level of more than 125 million bales.
“If realised, this would be the seventh consecutive year of growth as global textile consumption continues to recover from recessionary contractions,” the USDA said.
“Growth is expected in all of the top ten spinning countries, with continued very strong growth forecast for Vietnam and Bangladesh in particular, two countries that have led the way in growth over the last several years,” it said.
India is also expected to see above-world-average growth rates after several years of sluggish performance.