Following today's export ban by India, the question many are asking is if this move could be enough of a driver to propel prices to approach last year's highs.
In short, no, we do not see India’s suspension on cotton exports as enough of a catalyst to propel cotton to another rally similar to the 2010/11 surge that peaked well over $2.00/pound. Certainly, India is the second-largest producer and exporter of cotton in the world, and this move is likely prop up prices, if not give a boost to the market. But global fundamentals are quite different this year vs. last year and recent momentum was pointing to looser fundamentals ahead, unlike prospects for gradually tighter fundamentals witnessed about 1.5 years ago. What’s more, last year’s spike was the culmination of a ‘perfect storm’ of bullish ‘waves’ that all crashed together at the same time. These included tighter U.S & global balance sheets, record volatility, record backwardation, an unprecedented short squeeze in the U.S., and the weakest dollar in years, among a few. Today’s market certainly reflects a much different landscape.
Perhaps most importantly, today’s soft demand across the global textile supply chain is likely to keep cotton reined in well short of last year’s spike above $2.00/pound, regardless of India’s latest policy move.
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