Cotton Can’t Catch a Break

Dec 1, 2020

Like most crops in the commodity family in 2020, cotton could use a breather.

Prices are just now bouncing back after the ‘pandemic plummet’ when futures sank more than twenty cents from February to April.

A trifecta of intercontinental and economic factors nailed the price outlook:

  1. China’s textile mills shut their doors
  2. Extra cash spending dissolved on clothing purchases
  3. Physical store closures decimated foot traffic

But things got better.

China ramped up their buying to replenish their stockpiles and cotton prices crept higher over the summer.

Then Mother Nature clobbered the crop.

In Texas, where +40% of US cotton is produced, the growing season saw major hurdles.

→ Drought in the south and west gave the early crop trouble
Severe tropical storms delivered wind and hail that caused many to replant
Freezing temperatures in late October smattered sleet across harvest-ready fields

And even after all that, the USDA kept November production estimates flat at 17 million bales.

The kicker: While there may still be quantity, quality will be the issue. As ice or wind knocked lint out of the boll, the crop’s average grade could be subpar.  

The never-ending cycle:  So with high production estimates despite all the 2020 challenges, a surplus carryover into 2021 is a pretty sure bet. And with it being the highest estimated surplus in 13 years, cotton prices are about to get knocked down again. Only this time, it may be awhile before they get back up.