[This is part of the series: 8 Ways Fundamentals Impact Cotton Prices, Quantified]
This is post #8 looking at how different variables influence cotton prices.
For this post, let’s look at how changes to World Cotton Ending Stocks impact cotton prices.
This is where World Cotton Ending Stocks is the amount of cotton that is globally left unconsumed in storage at the end of a given year.
Basic economics tells us that, other things constant, more cotton left in storage will lead to lower prices, and less cotton would lead to higher prices.
Based on my estimates, this instinct is correct.
As I have it calculated:
An additional 1 million bales of cotton left in global storage would lead – on average – and all else being equal – to a .64 cent decrease in the US price of cotton.
World Cotton Ending Stocks moving from 100 to 101 million bales would, on average, make a cotton price of 70 cents move to approximately 69.36 cents.
The opposite is also true.
1 million fewer bales of cotton consumed by cotton mills leads, on average, to a .64 cent increase in US cotton prices.
The push and pull of supply and demand on prices is as expected, all we did was quantify it.