With cotton prices dropping to a five-year low late last month, it’s expected farmers around the globe will cut planting in the coming season, according to the International Cotton Advisory Committee.
The effect of lower prices is already being realized in crop planning in the Southern Hemisphere, the executive director of the committee said during an industry conference in India last week.
With the US government estimating that global production will outstrip production for a fifth straight growing season and inventories at an all-time high, New York cotton futures recently tumbled to their lowest level since September 2009.
“Everybody is trying to sell and prices are going to go down because supply is higher,” Terry Townsend, a former executive director of the committee, told the conference. “That process of declining prices, farmers losing money, and some farmers going out of business, reducing cotton production is inevitable.”
Cotton futures have slipped below 60 cents a pound, with March 2015 futures closing at 59.18 cents a pound, down more than 70 percent from an all-time high of $2.197 reached in 2011, according to Cotton Market News.
Global reserves are expected to reach an all-time high of 107.36 million bales, each weighing 480 pounds, according to USDA data.
Don’t look for prices on cotton products to reflect the downturn in futures prices, however. There is often a disconnect between the return farmers get for their efforts and what consumers pay for finished products.