Source: Cotton 24/7

The decline is attributed to uncertainty and unclear policies, but big fourth quarter gains give hope.

January 2, 2013

Cotton was down 17% in 2012 due to oversupply and low demand for the commodity fiber. This number makes cotton the third-largest decline (behind Arabica coffee and U.S. orange juice) of any of the 19 commodities tracked by the Thomson Reuters-Jefferies CRB index.

The decline, however, according to the India Times, could be considered less than representative of expectations for the commodity in the coming year, as cotton made a solid attempt at a fourth quarter comeback, rising 8.6% late in the year.

Expectation sin the new year remain uncertain among cotton industry professionals, though, due to fears of the unknown fate of China’s infamous stockpile, which has caused investors to bet on the higher prices in the coming year. There are also concerns that growers will plant less of the fiber in favor of higher priced, more profitable grains.

ICAC reports that the aforementioned Chinese stockpile contains more than 7 million tons of cotton which has been accumulated over the last 14 months through the purchase of both domestic and foreign fiber. Terry Townsend, executive director of ICAC, states that although it is possible that should Chinese policies remain the same, cotton prices could be supported, these policies could changed, however, in March of 2013, creating uncertainty for the cotton industry at all levels. (Source: Times of India, Business Recorder) (Source: Cotton 24/7)