The World Bank’s raw material price index, which had been broadly stable through end-2021, made moderate gains in the first quarter (Q1) of 2022—up by 2.8 per cent quarter on quarter (QoQ). Cotton prices are expected to be nearly 40 percent higher in 2022, before easing 6 percent in 2023 as weather-related challenges unwind, a report from the bank said.
However, one of the index’s two key components, cotton, followed a diverging path in response to reduced cotton supplies. The index is expected to rise marginally in 2022 and stabilise in 2023.
Risks to the outlook emanate from weakening demand due to lockdowns, especially in China, the World Bank said in its ‘Commodity Markets Outlook: The Impact of the war in Ukraine on Commodity Markets’.
Cotton prices continued their upward trend that began in early May 2020 to reach an 11-year high in March. Prices have increased in 20 of the past 23 months.
The overall price strength reflects gradual improvement in the outlook for global demand, which is expected to average 26.2 MMT in the current season, 2 per cent higher than 2020-21. This outlook is a marked improvement over the previous season’s pandemic-related contraction of more than 13 per cent.
On the supply side, global production is projected to increase by 8.4 per cent, led by the world’s largest exporters— Brazil and the United States (with shares of about 20 per cent each).
Production in China and India, the world’s largest producers, is expected to decline marginally due to weather-related challenges.