Cotton futures decline for third year on demand struggles, tariff concerns
Dec 31 (Reuters) - ICE cotton futures were headed to a third-consecutive annual decline, as weak global demand and concerns over U.S. President-elect Donald Trump's threatened trade tariffs on top consumer China weighed on the market.
The front-month March CTc1 contract rose 0.3% or 0.21 cent at 68.69 cents per lb as of 10:55 a.m. ET (1555 GMT) on Tuesday and was down over 15% for the year.
"The underlying issue was that China was nowhere near the buyer of U.S. cotton, as she once was," said Keith Brown, principal at cotton broker Keith Brown and Co in Georgia.
Some countries' economies are still struggling to recover from the pandemic, while poor marketing by U.S. growers has further undermined the cotton market, Brown said.
China is the biggest consumer of cotton but the country's industry has struggled with weak consumption and investment.
If demand remains lackluster, cotton prices might stay relatively weak, ranging between 60 and 85 cents in 2025, according to analysts.
Trump's policies could spark global trade wars, hurting the export-dependent cotton market as they may damage ties with China, dampening overall demand, said Jack Scoville, vice president at Price Futures Group.
Cotton prices also took a hit due to the stronger U.S. dollar, which was up over 6% for the year. A stronger U.S. currency makes cotton more expensive for overseas buyers, further dampening demand. USD/
The United States Agriculture Department in its December supply-demand report raised U.S. cotton production estimates to 14.3 million bales and ending stocks to 4.4 million bales, while global production and ending stock estimates also increased, driven largely by India’s crop. EXP/COT
Oil prices were set to end 2024 with a second consecutive year of losses, making polyester, a cotton substitute made from oil, cheaper. O/R
In the grain market, Chicago soybean, wheat, and corn futures were on track for a second annual decline, though weather concerns helped prices rebound at year-end. GRA/
(Reporting by Sherin Elizabeth Varghese and Anmol Choubey in Bengaluru; Editing by Rod Nickel)
((sherinelizabeth.varghese@thomsonreuters.com;))
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