Market Observation: Only India Has Seen A Rebound In Global Cotton Prices Recently

According to the feedback from several international cotton merchants and Indian export enterprises, the domestic cotton price in India fell first and then rebounded in the past week. On December 3-4, the spot price of S-6 was about 54600 rupees/kandi (equivalent to 82.34 cents/pound), up 300 rupees/kandi (0.32 cents/pound) from the previous week.

With the continuous recovery of domestic downstream demand in India, although the market volume of new cotton in India in 2024/25 had exceeded 1 million tons by the beginning of December, the inquiry/contracting of foreign cotton such as American cotton, Brazilian cotton and Australian cotton was also active. According to statistics, up to now, the total inventory of Indian cotton companies has risen to about 2 million bales (about 340000 tons), an increase of 400000 bales (68000 tons) over last week.

As for the recent rebound of Indian domestic cotton prices, cotton related enterprises and institutions generally believe that, in addition to the strong support for the rebound of ICE cotton futures contracts in March, it is also related to the following four factors:

First, the Ministry of Agriculture of India predicted for the first time that India's cotton output would be 29.9 million bales (about 5.083 million tons) in 2024, a year-on-year decrease of 8%, mainly due to the reduction of cultivated land area and the destruction of the harvest due to excessive rainfall. The industry is increasingly worried about the increasing pressure on India's domestic cotton supply in 2024/25.

Second, the acquisition of CCI was fully launched, and MSP played a prominent role in supporting cotton prices. According to statistics, by the end of November, the purchase volume under India's MSP had reached about 1.2 million packages (204000 tons), an increase of 700000 packages (119000 tons) compared with last week, showing a rapid growth momentum. In addition to the states of Telangana and Karnataka, CCI purchases in central cotton regions such as Gujarat and Maharashtra also continued to increase.

Third, India CCI raised the base price of the old cotton in 2023/24 by 400 rupees/kandi to 53300 rupees/kandi (about 80.65 cents/pound), stimulating the rebound of spot price in the market.

Fourth, the operating rate of Indian cotton mills remained at a relatively high level, and we are full of expectations that the Trump government will significantly impose tariffs on Chinese imports in 2025, which will lead to the large-scale transfer of cotton textile and clothing orders from the United States/EU to Southeast Asia/South Asia.