In the middle of September, New York cotton futures began to rise and on November 5th reached the 80-cent/lb. level for December deliveries. Virtually, all these price movements arose from the trends in China.
In its report for October 2003, the U.S. Department of Agriculture announced its cotton harvest estimate at 25.50 million bales for the 2003-04 cotton year. There are mixed theories, however, and some private research firm's forecast is 20.67 million bales, a substantial drop.
On the other hand, China is in the midst of great spinning equipment expansion and the demand is skyrocketing. The estimated number of spinning spindles in China exceeded 50 million last year. Japanese spinning firm sources describe this phenomenon as follows: "China is shopping around the world markets for cotton." With even old cotton market prices in China soaring up, the supplydemand picture is considered tight up to the extent that cotton fiber prices have regained a price of about US$1/Ib., which prevailed several years ago. Against the backdrop of this situation, speculative forces came into the market to form the present high prices.
Even so, there is a persistent view that new cotton in China is "in storage somewhere without appearing on the market," according to trade sources. New cotton prices were low for two days on October 30th and 31st. Despite the announcement on October 30th that the order bookings of U.S. cotton exports to China in the fourth week of October reached an all-time high of 1.23 million bales, the market has too much speculative coloring. It is not possible to eliminate the possibility that the future course taken by new cotton in China can cause sharp drops in market prices.
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