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Cotton Incorporated Lifestyle Monitor™

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Home > Newsletter > Monthly Economic Letter March 2025

Monthly Economic Letter March 2025

March 12, 2025

Jon Devine

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RECENT PRICE MOVEMENT

Cotton benchmarks were either flat or slightly lower over the past month.

  • In early March, prices for the nearby May ICE/NY futures contract dipped below the downward sloping channel that has contained values for the past several months.  Following the dip, which brought prices as low as 63 cents/lb, prices rebounded back into the channel and are currently trading at 67 cents/lb.
  • Despite some movement higher and lower, the A Index ended the month unchanged at 78 cents/lb. 
  • The Chinese Cotton Index (CC Index 3128B) was generally stable, holding between 91 and 94 cents/lb.  In domestic terms, prices were between 14,800 and 15,000 RMB/ton. The RMB eased slightly, from 7.31 to 7.25 RMB/USD over the past month.
  • Indian spot prices (Shankar-6 quality) were nearly unchanged around 77 cents/lb or 53,000 INR/candy for most of the past month. The INR was stable near 87 INR/USD.
  • Pakistani spot prices eased from 78 to 75 cents/lb over the past month.  In domestic terms, values fell from 18,000 to 17,300 PKR/maund. The PKR was steady at around 280 PKR/USD.

SUPPLY, DEMAND, & TRADE

The latest USDA report featured small increases to world production (+500,000 bales to 121.0 million) and mill-use (+595,000 bales to 116.5 million).  There were no historical revisions and no changes to beginning stocks, so the net effect on the forecast for 2024/25 ending stocks was a decrease below 100,000 bales (to 78.3 million).

At the country-level, the largest changes for production were for China (+750,000 bales to 31.8 million) and Pakistan (-200,000 bales to 5.0 million). Due to favorable growing conditions and record yields, the Chinese crop estimate has increased +3.6 million bales since December.

For mill-use, the largest changes were for Pakistan (+300,000 bales to 10.3 million), Bangladesh (+200,000 bales to 8.3 million), and Egypt (+150,000 bales to 725,000). 

The global trade figure was lifted +215,000 bales to 42.7 million.  In terms of imports, the largest changes were for China (-500,000 bales to 6.8 million), Egypt (+100,000 bales to 625,000), Bangladesh (+200,000 to 8.2 million), and Pakistan (+500,000 to 5.5 million). For exports, the largest changes were for Australia (-100,0000 bales to 5.4 million), Turkey (+150,000 bales to 1.0 million), and Brazil (+200,000 bales to 13.0 million). 

As China’s production estimate has increased, China’s import figure has fallen. Since November (revisions to imports began sooner than change to production), the forecast for Chinese imports has decreased -3.2 million bales (from 9.0 to 6.8 million bales).  The current prediction suggests China will import less than half the volume from last crop year (15.0 million bales).

PRICE OUTLOOK

In February, the USDA releases a partial, preliminary, set of estimates for supply, demand, and trade in an upcoming crop year.  Early projections for 2025/26 suggest slightly lower production (from 121.0 in 2024/25 to 116.7 million in 2025/26), higher mill-use (from 116.5 in 2024/25 to 119.0 in 2025/26), and increased trade (from 42.7 million in 2024/25 to 46.0 million in 2025/26).

Due to its position as the world’s largest producer, spinner, and traditional importer of cotton, much of the change at the world level were due to changes expected in China.  In 2024/25, China enjoyed record yields, which enabled its largest harvest since 2013/14.  In 2025/26, yields are expected to return to trend, and China is forecast to have a smaller crop (from 31.8 million bales in 2024/25 to 28.5 million in 2025/26).  The -3.3 million bale decrease in the Chinese crop is the largest country-level change expected in 2025/26. 

The only other expected changes of one million bales or more in 2025/26 are for Brazil, where another record crop is expected (from 17.0 million bales in 2024/25 to 18.0 million in 2025/26), and India, where declining yields are a factor (production down from 25.0 million bales in 2024/25 to 24.0 million in 2025/26). 

There is considerable uncertainty around the U.S. production number, with a wide range of estimates for planted acreage and unknowable weather in West Texas (which will influence how many planted acres are ultimately harvested).  The early USDA figure assumes planted acreage and abandonment towards the lower end of publicly available forecasts and indicates a slight increase in the U.S. crop in 2025/26 (from 14.4 million in 2024/25 to 14.6 million in 2025/26).

For mill-use, preliminary USDA figures suggest that the slight upward trend that began in 2022/23 will accelerate in 2025/26.  The forecast acceleration was justified through increased cotton supply, inventory stabilization, and global economic growth.  While inventory stabilization appears to be taking place in the U.S. (apparel import volumes have surged since October), financial markets have been raising questions about the trajectory for U.S. consumer spending and economic growth.  Spending in other major consumer markets may also face challenges in 2025/26.  China continues to struggle with the effects of a weakened housing market, which has lowered consumer wealth and confidence.  European economic growth has been anemic since inflation took hold and is not expected to enjoy strong economic growth in 2025 or 2026.

While a combination of lower production and higher consumption could lend some support to the price outlook, the trade environment has proven influential on prices in recent years.  After setting a record in the current crop year, exportable supply can be expected to be similarly abundant in 2025/26.   Stronger mill-use can help import demand.  But, since China built-up reserves last crop year and is collecting a large crop this crop year, it may be difficult for imports to generate sufficient demand-side urgency to move the market.

Disclaimer: The information contained herein is derived from public and private subscriber news sources believed to be reliable; however, Cotton Incorporated cannot guarantee its accuracy or completeness. No responsibility is assumed for the use of this information and no express or implied warranties or guarantees are made. The information contained herein should not be relied upon for the purpose of making investment decisions. This communication is not intended to forecast or predict future prices or events.