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Monthly Economic Letter
May 2022

May 17, 2022

Jon Devine


Most benchmark prices increased over the past month.  Chinese prices decreased.

  • The July NY/ICE futures increased from 130 cents/lb to 145 cents/lb.
  • The December NY/ICE futures contract, which reflects price expectations after the 2022/23 harvest, rose from 115 cents/lb one month ago to 128 cents/lb.
  • The A Index increased from 152 to 162 cents/lb.
  • The China Cotton Index (CC 3128B) decreased. In international terms, it dropped from 162 to 151 cents/lb.  In domestic terms, values fell from 22,700 to 22,300 RMB/ton.  Over the past month, the RMB weakened against the dollar from 6.37 to 6.73 RMB/USD.
  • Indian spot prices (Shankar-6 quality) climbed from 153 to 164 cents/lb and from 91,500 to 99,000 INR/candy. Over the past month, the INR traded between 75 to 78 INR/USD.
  • Pakistani spot prices rose from 137 to 147 cents/lb. In domestic terms, prices climbed from 20,700 to 23,000 PKR/maund.  The PKR weakened against the dollar over the past month, from 181 to 190 PKR/USD.


The USDA issues its first complete set of forecasts for an upcoming crop year in May.  Given the rapidly evolving geopolitical and macroeconomic situation, as well as recent volatility in crop and input prices, the establishment of estimates is especially challenging for 2022/23.

For 2022/23 production, the USDA forecasts a +2.6 million bale increase year-over-year (+2.2%) from 118.4 to 121.1 million bales.  At the country-level, the greatest increases are projected for India (+2.0 million bales to 27.5 million), China (+500,000 bales to 27.5 million), Turkey (+500,000 bales to 4.3 million), and Pakistan (+200,000 bales to 6.2 million).  Due to weather concerns, the U.S. is expected to grow less cotton in 2022/23 (16.5 million bales) than in 2021/22 (17.5 million bales).  If rains do not arrive in Texas before planting windows close around the middle of June, the decline in U.S. output could be larger.

For 2022/23 mill-use, the USDA predicts a 1.0 million bale decrease    (-0.7%), from 122.9 million bales to 122.0 million).  The projected level remains high by historical standards.  If realized, it would represent the 5th highest volume on record.  However, there are significant downside risks.  Despite the small size of the forecast reduction, the USDA appears to have acknowledged these risks by proposing its first year-over-year reduction in global use in its initial May release in 36 years.

At the country-level, the year-over-year largest reductions to mill-use were for China (-500,000 bales to 38.0 million) and India (-500,000 bales to 25.5 million).  Consumption is forecast to increase year-over-year in Bangladesh (+200,000 bales to 9.0 million), Pakistan (+100,000 bales to 11.1 million), and Vietnam (+100,000 bales to 7.5 million).

Global cotton trade is forecast to rise to the second-highest volume on record in 2022/23 (+2.1 million bales to 47.6 million, only behind million bales, to the 49.1 million shipped in 2020/21).  In terms of imports, the largest increase is forecast for China (+1.7 million bales to 10.5 million).  Bangladesh (+500,000 bales to 8.8 million), India (+500,000 bales to 1.7 million), Pakistan (+200,000 bales to 5.0 million), and Vietnam (+100,000 bales to 7.5 million) are also expected to import more in 2022/23.  Turkey is projected to import less (-550,000 bales to 5.0 million).  For exports, the largest year-over-year changes include those for Brazil (+2.1 million bales to 10.0 million) and Australia (+1.3 million bales to 5.7 million).  The U.S. is expected to ship less (-250,000 bales to 14.5 million).

Revisions were also made for 2021/22.  Globally, production was lowered -1.8 million bales (to 118.4 million).  This was primarily a result of a -1.0 million bale reduction for India (to 25.5 million) and a -650,000 bale reduction for Uzbekistan (to 2.8 million).  World mill-use in 2021/22 was lowered -1.1 million bales (to 122.9 million).  The reduction in consumption was primarily a result of lowered estimates for China                (-500,000 bales to 38.5 million), India (-500,000 bales to 26.0 million), and Uzbekistan (-500,000 bales to 2.8 million).  The U.S. export forecast was unchanged, but the Chinese import number dropped -400,000 bales (to 8.8 million) and India’s export forecast was lowered -500,000 bales (to 4.4 million).


Cotton prices continued to move erratically higher despite a series of growing obstacles from the demand side of the balance sheet.  The International Monetary Fund (IMF) lowered their forecasts for global GDP growth from the 4.4% released in January to 3.6% in late April (representing a nearly 20% decrease in growth).  Inflation, the ongoing shipping crisis, supply chain disruptions presented by the war in Ukraine, COVID-related lockdowns in China, as well as the withdrawal of stimulus in the U.S. and other economies are all macroeconomic headwinds the market faces.

There are also issues specific to cotton associated with weakening demand.  There have been consistent reports of slow downstream order placement in China for months.  In the U.S., weekly export sales turned definitively lower since NY/ICE futures ventured above 120 cents/lb in the second half of March.  Higher food and energy costs can be expected to pinch consumers’ disposable income around the world, and this can impact global demand for apparel and home textiles.

For production, higher cotton prices generally lead to increased plantings.  However, high prices for competing crops are expected to prevent the robust acreage response that otherwise could be expected with cotton prices at their highest levels in more than a decade.  The weather is also a limiting factor.  Despite a forecast that the U.S. will increase planted acreage by +9% in 2022/23 (USDA’s survey-based forecast released in March), dry conditions in Texas and the Southwest growing region are predicted to cause widespread abandonment.  High input costs may lower applications, and it is unknown what the global consequences may be for yield.

For the outlook, the net result is that there are no shortages of challenges for either production or demand.  When and if prices turn lower, inventory could evolve into a liability.  Depending on the depth of any potential reversal, cancelations and financial loss could result.

Monthly Economic Letter – May 2022

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.