The price of cotton, which fell by around 20% in 2012, has turned around to become the best performing of the major agricultural commodities so far this year, rising by about 10%. This recovery has primarily been driven by optimism over the prospects for the global economy. However, excessive stocks in China, rising competition from man-made fibres and the prospect of a renewed deterioration in the macro-economic and financial outlook, all suggest that the risks to cotton prices will shift back to the downside as the year progresses. We therefore expect the US benchmark price to finish 2013 at around 55 cents per pound, down from 82 today.
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