This is part of the series: [8 Ways Fundamentals Impact Cotton Prices, Quantified]
This is post #3 looking at how certain variables influence cotton prices.
I have explored how US Beginning Stocks relate to cotton prices.
Let’s take a second and look at US cotton mill use.
How do changes to US Cotton Mill Use correlate with the price of cotton?
This is where US cotton mill use is the amount of cotton consumed in US textile plants within a particular harvest season.
Once again, using intuition, we would assume that more cotton mill use would lead to higher prices.
More cotton consumed increases demand for cotton, while at the same time reducing available cotton stocks through that consumption.
Conversely, we would also predict that less cotton used in US mills would lead to lower prices.
As far as I can tell, it turns out that this basic hunch is correct.
Based on the estimates I have calculated:
An additional 1 million bales of US mill use consumption would lead – on average – and all else being equal – to a .3 cent increase in the US price of cotton.
US Mill Use moving from 4 to 5 million bales would, on average, make a cotton price of 70 cents move to approximately 70.3 cents.
The opposite is also true.
1 million fewer bales of US Cotton Mill Use leads, on average, to a .3 cent decrease in US cotton prices.
More U.S. cotton mill use means higher U.S. cotton prices.
Of course it does.