Agrimoney: Cotton prices to rise on back of shift to consumer online clothing purchases

Online shopping during the pandemic is driving cotton prices up, rescuing the industry. This is what is forecast to happen next.

Cotton prices are expected to climb further in the next year, as demand surges for the fibre.

A switch to online orders in the apparel trade during the Covid-19 pandemic has rescued the global cotton industry from last year’s doldrums, with prices set to push higher in the short term.

According to a report by UK-based commodity analyst firm Agrimoney, cotton futures have risen about 75 per cent since the low during the global stockmarket crash in March last year to today’s level of about US90 cents a pound, or $A623 a bale.

While that was still less than half the 2011 spike which saw prices rocket to $US2/lb, Agrimoney report author and lead analyst Gary Mead said the price outlook remained “much more skewed to a repeat of 2011’s spike than a retreat to 2020’s low”.

The 2011 spike pushed cotton prices to their highest level in 140 years.

Prices on Winnipeg’s International Commodity Exchange show a steady rise in global cotton futures prices during the past 15 months but the exchange does not share the same optimism as Agrimoney, with May 2023 contract prices pegged at US82c/lb, or $A557 a bale.

Cotton Australia chief executive Adam Kay said he did not expect prices to hit 2011 highs but they would be relatively high.

Mr Kay said current prices were nearly $620 a bale for what was left for this year’s crop and more than $600 was being offered for next season.

“These are good prices starting the new season,” he said.

“I wouldn’t be surprised if more than 20 per cent of next year’s crop was already sold.”

Mr Mead said demand for cotton was outstripping supply due to better-than-expected apparel sales and other factors.

“Macroeconomic factors — economic growth, inflation, loose monetary policy by central banks — will heavily influence consumer demand and hence the cotton price,” he said.

“This trend to online consumer spending will endure long after coronavirus is a distant nightmare.

“According to Cotton Incorporated, 69 per cent of consumers surveyed in China, 45 per cent in the US and 37 per cent in Mexico expect to purchase at least half of their apparel online in the future.”

Mr Mead said the International Cotton Advisory Committee, based in the US, was forecasting global cotton stocks were expected to end 2021-22 at their lowest level in four years.

Mr Kay said Australia was in a box seat for cotton sales, with the global market requiring more sustainably produced fibre.

It was well timed with a wet season allowing the build-up of irrigation water.

He expected Australian farmers to produce one million tonnes of fibre next year, worth $3 billion in exports.

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