Fears of cotton prices soaring as a result of the US-China tariff war are unlikely to materialise, in a welcoming development for Bangladesh's textile millers.
Bangladesh is almost entirely dependent on imports for its cotton requirement, making it the world's largest buyer of the natural fibre from the global market.
Last week cotton was trading at between 75.5 cents and 77.5 cents per pound in the international futures markets, down from 90 cents per pound in March and April last year, when talks of the trade war were at its peak.
“Cotton prices declined a bit over the last one year instead of soaring,” said Monsoor Ahmed, secretary to Bangladesh Textile Mills Association (BTMA), a platform for textile millers, spinners and cotton importers.
Bangladesh imported 8 million bales of cotton last year, up from 7.6 million bales a year earlier, he said.
The reason for the dip in cotton prices is that China, the biggest consumer of cotton due to being the world's largest supplier of apparel, has cut down on its cotton purchases to clear out its old stock.
China has old stocks of 38 million bales of cotton and 27.5 million bales in production in the 2018-19 season, which runs from September to August, according to data from the United States Department of Agriculture (USDA).
World trade is expected to increase to 42.3 million bales in 2018-19, the highest level since 2012-13's record.
Production will exceed consumption in 2019-20, raising world stocks slightly by 1 million bales.
World cotton consumption in 2018-19 is expected to reach 123.6 million bales, growing 0.9 percent from the previous year, to the highest level since 2007-08.
“So, there is ample supply of cotton worldwide but the demand from major countries is almost the same,” said Mehdi Ali, president of Bangladesh Cotton Association (BCA).
The production in major cotton-producing countries is also high except for in India.
“As a result, the trade war could not have any bad impact on cotton trade worldwide,” Ali said.
The US is the largest grower of cotton.