Cotton market ruled by India globally as US-China trade war escalate

In the global cotton market, India stands to be at the top amid the escalating trade tensions between the United States, the world’s top exporter, and China, the biggest buyer.

The weak rupee-dollar ratio makes India’s exports more appealing, and the cargo costs to the neighbouring Asian country can be relatively cheap, Keith Brown, the president of Keith Brown & Co., a brokerage in Moultrie, Georgia, said. “It’s a question of price and proximity,” he said.

“China will still get cotton from the US” possibly indirectly, he said. Mills may obtain some cargoes via Vietnam, or through American supplies including a tariff, he said.

Cotton on Tuesday had tumbled by the exchange limit on ICE Futures US in New York and had slumped 12% from a four-year high of 94.82 cents a pound on June 6. China had bought almost 1.5 million bales from the US this season, “and traders are now concerned about the cancellation of those sales,” Louis Rose, director of research and analysis at Rose Commodity Group in Memphis, Tennessee, said in a report.

The Cotton Association of India said last week that the output this season will rise 8.3% from a year earlier, boosting exports. China’s inventories have dwindled from a record in 2015 amid a decline in the acreage. The government plans to issue some additional import quotas because bad weather is said to have damaged the domestic crop, and a shortfall of high-quality fibre looms.

In the US, the cotton futures rose as much as 21% this year as a drought eroded crop prospects in West Texas, the top producing region.

“We went up way too fast, and now we are coming down way too fast,” Brown said.

The futures for December delivery fell 3.95 cents, or 4.5%, to close at 83.82 cents a pound on Tuesday after tumbling by the limit of 4 cents.