Long Run Trends and Fluctuations in Cotton Prices

Real cotton prices have fallen significantly since 1900, but statistical verification of the presence of a long-run downward trend has proven elusive. Cotton price volatility has varied widely over the last 226 years, with volatility correlated with macroeconomic instability, although its period of greatest instability—during the U.S. Civil War—was primarily driven by cotton-specific trade and production disruptions. One of the periods with the largest cotton price volatility since 1792 occurred over 2009-12, and was in part a consequence of nearly unprecedented macroeconomic instability and. in part due to factors specific to cotton markets at the time. Cotton price volatility over the next decade is likely to be greater than the volatility experienced during the last 2 years.