Global cotton futures have slipped to a new low since January this year, driven down by slower demand in China and a shortage of shipping containers.

Although cotton futures rose 20% early this year, they began to slump on Feb. 24, dropping from a high of 93.62 US cents per pound to 77.38 US cents for contracts expiring in May. Friday’s sharp drop of 17.3%, dipping below the 100-day average, marked the lowest level since Jan. 4.

Cotton exports from the U.S. decreased in mid-March, according to agricultural statistics, probably because of the slower demand in mainland China. Some market observers also blamed short-selling of cotton futures, driven by higher shipping cost and worries about the pandemic.

Apart from higher freight costs, the strong U.S. dollar and pandemic concerns helped to push down cotton prices, said John Robinson, an economist with Texas A&M University’s AgriLife Extension.

The price of cotton futures is also falling in mainland China. Before the Chinese New Year in mid-February, downstream manufacturers of cotton products scrambled to acquire raw materials as a spike in overseas orders drove up prices. Many cotton producing companies locked in early profits.

By early February, cotton futures had risen to 17,080 yuan (US$2,611) per ton on the Zhengzhou Commodity Exchange in central China’s Henan province. But the excess inventory has nullified all the gains since February, market watchers said.

China is the world’s second-largest cotton producer and the largest cotton consumer, accounting for one-third of total global consumption.

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