Driven down this summer by strong U.S. output and weak demand in China, cotton prices are hovering around their lowest level since 2009. After moderating slightly, cotton is priced at 63 cents per pound after being around 90 cents per pound earlier in 2014. 

Meanwhile, cotton futures are trading below the 10-year average of about 74 cents per pound and the 20-year average of 69 cents a pound.

Following seasons of drought, key cotton-growing areas in the U.S. – like Texas – have seen better recent weather. Because of increased rainfall, government forecasters have raised their estimate for U.S. cotton output during the 2014-15 season by 10% to 16.5 million 480-pound bales. Officials in India – the world’s second-largest cotton producer behind the U.S. – have announced production of the fiber is set to climb to an all-time high this season as typical monsoon rains have yet to arrive.

In China, where the government has been stockpiling cotton for years, imports of the commodity fell 42.2% in the first half of 2014 to 1.39 million tons. Along with that trend, the U.S. Department of Agriculture reported in July that foreign buyers had canceled some of their cotton orders. Net U.S. export sales of common upland cotton were cut by almost 2,000 bales during the week ended July 17 alone.

Economic expectations are also pushing cotton prices lower. The International Monetary Fund has reduced its 2014 global growth forecast to 3.4%, down from 3.7%. Cotton is one commodity sensitive to economic forecasts as demand is tied to consumer spending, like apparel. Some analysts believe the overall drop in cotton prices could next spark defaults from mills that contracted cotton at higher prices. With further declines, the price of cotton could even reach a threshold that would allow farmers to receive U.S. government loan repayment assistance.

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