While other commodities have experienced significant price swings throughout the year, cotton has maintained a remarkable period of stability.
Since January, the price of cotton has consistently traded within a narrow band of 65 to 69 US cents per pound, a stark contrast to the volatility seen elsewhere in the commodity markets.
Historical volatilities for cotton plummeted to multi-year lows this week, underscoring the current calm.
In September, the difference between the monthly high and low has been a mere 2 US cents, according to Commerzbank AG.
This trend of limited price movement was also observed in July and August.
The first half of the year typically saw monthly trading ranges of 4-5 US cents, with April being the sole exception at 9 US cents.
This brief surge in volatility in April was attributed to a temporary price dip to just over 60 US cents, following the announcement of reciprocal tariffs by US President Donald Trump, the German bank said in an update on Friday.
“The decline in price volatility began last year, after the price peaked at around 100 US cents per pound in the first quarter of 2024,” Carsten Fritsch, commodity analyst at Commerzbank, said in the update.
Market equilibrium is a key factor
The prevailing stability in cotton prices can largely be attributed to the market’s near-equilibrium state since last year.
For the current 2025-26 crop year, the US Department of Agriculture (USDA) forecasts a slight supply deficit of 250,000 tons.
This is based on a projected supply of 25.62 million tons and a demand of 25.87 million tons.
The previous crop year saw an even smaller difference between supply and demand, with a minor supply surplus.
The US cotton crop is anticipated to decline by 8% this year, a consequence of significantly reduced acreage and lower yields.
However, a lower abandonment rate (the difference between planted and harvested acreage) has helped to limit the overall decrease in crop volume, Fritsch added.
Due to the smaller harvest and a slight increase in exports, US cotton stocks are expected to be marginally lower at the end of the crop year compared to the beginning.
China’s dominance and trade conflict impact
The global cotton market is heavily influenced by China, which holds the top position in both supply and demand, ahead of India.
As China consumes more cotton than it produces, it relies on imports.
These imports saw a significant decline in the last crop year and, according to USDA forecasts, are not expected to rebound substantially this year.
Brazil, having replaced the US as the largest cotton exporter two years ago, could easily fulfil China’s import requirements on its own.
“That is why the trade conflict is likely to play a lesser role for cotton than for many other agricultural commodities,” Fritsch said.
It is clear that the calm in cotton prices will not last forever.
While the current calm in cotton prices is not expected to last indefinitely, what might ultimately disrupt this equilibrium remains unclear.
However, it is completely unclear what could push the price out of its comfort zone.
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