Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, comments on cotton prices and demand after India ended curbs.
India, the worldΆs second-largest cotton shipper, lifted restrictions on overseas sales of raw cotton yesterday. Mathews spoke by phone from Sydney.
On prices:
“All things being equal, we would expect this to weigh on the global complex, but the exact influence right now is a little bit more blurred because of the crop-production issues we are seeing in the U.S.
“In isolation, the Indian story is certainly bearish for prices. Considering the fact that we have relatively lackluster global demand, the overall impact on world prices may be muted because of the drought we have seen throughout Texas.”
On cotton demand:
“We havenΆt seen great demand in general for cotton and that was one of the contributing factors for global cotton prices slumping in the first half of 2011.
“We would start to expect global cotton demand to reenter the market around these levels, but nothing is a given. We havenΆt seen confirmation of that in any significant way over the last couple of weeks with prices hovering around 100 cents a pound.
On demand for Indian cotton:
“At the end of the day it depends at what price this cotton is offered to the global market.
“If you look at the global wheat market, weΆve seen over the last three months a lifting of a Russian wheat export ban. There was originally some concern about the global demand for that particular wheat, but with the prices that that grain was offered at, $20 up to $50 a ton under world markets it soon unearthed demand.
“If the cotton market plays out in a similar vein with Indian cotton offered underneath global prices, then it might spur the world consumers to come to the market.
“Global buyers of cotton will be wary of the potential changes to export policies by the Indians, and by any global supplier of agricultural products. Again, if the price is right that can incentivize buyers to perhaps overcome those fears.
“At the end of the day, it will simply depend on the price, the value that this cotton is offered.”
