by Cotton Incorporated

Recent price movement

Most benchmark prices decreased over the past month. Chinese spot prices were stable.

？ After maintaining a range between 65 and 69 cents/lb since early May， the NY December contract broke lower in the second week of July and fell to levels near 63 cents/lb.

？ The A Index also declined， dropping from its range between 76 and 78 cents/lb to levels near 74 cents/lb.

？ After falling steeply in May， the China Cotton Index （CC Index 3128B） has been comparatively stable in June and into early July. In international terms， values have held near 94 cents/lb. In domestic terms， values have held near 14，200 RMB/ton.

？ Indian cotton prices （Shankar-6 quality） moved slightly lower over the past month， falling from 84 to 82 cents/lb in international terms and from 45，600 to 43，900 INR/candy in domestic terms.

？ Pakistani prices fell from 71 to 64 cents/lb in international terms. This was partly due to a weaker PKR （-5% over the past month， the PKR is down over 10% since the mid-May）. In domestic terms， Pakistani prices eased from 8，800 to 8，400 PKR/maund.

Supply， demand， & trade

The latest USDA report featured many changes to figures for both the soon-to-expire 2018/19 and the soonto-begin 2019/20 crop years. For global production， estimates for both 2018/19 and 2019/20 increased by a little less than half a million bales （2018/19 production+454，000 to 119.3 million bales， 2019/20 production +470，000 to 125.8 million bales）. For global mill-use， estimates for both 2018/19 and 2019/20 were lowered（2018/19 use -1.0 million to 121.1 million bales， 2019/20 use -620，000 to 124.3 million bales）.

With production higher and consumption lower， a net effect was an increase in the estimate for global stocks. The figure for world ending stocks in 2018/19 increased 1.7 million bales （to 79.3 million）. That carried through to 2019/20 as an increase in beginning stocks and contributed to the 3.2 million bale upward revision to the forecast for 2019/20 ending stocks （to 80.4 million）. This erased the two million bale yearover-year reduction that was projected for 2019/20 last month and replaced it with a 1.2 million bale increase.

The allocation of global stocks has been important for prices in recent years. The 3.2 million increase in global stocks is expected to be nearly evenly split between China （1.5 million bales versus last month， to 33.0 million） and the worldless-China （+1.7 million bales versus last month， to 47.4 million）.

Despite the reopening of negotiations， there have not been any statements suggesting Chinese tariff increases on U.S. cotton exports will be reduced or eliminated. In 2019/20， the U.S. is expected to grow 22.0 million bales of cotton. With only 3.1 million bales of domestic use， exports will need to be strong to prevent a major accumulation of stocks. U.S. ending stocks are already forecast to grow by more than 30% and that is with a projection of near-record exports. If shipments end up being weaker than forecast， further build up in supply in the worlds largest exporter could weigh on prices globally.

These trade-focused questions are on top of the weather-related ones that are standard this time of year. Although crop condition ratings have been good， it has been a challenging start to the season in the U.S. An illustration is that the USDA has had to resurvey growers for its June Acreage Report because wet weather inhibited planting （new numbers to be released August 12th）. The Indian monsoon， which is the source of 85% of annual Indian rainfall， got off to a concerningly slow start. More recently， rainfall has been heavy and widespread， and concerns have eased. The Chinese crop is slightly behind schedule due to a cool spring， but expectations are that yield should be at least as good as last year.