Cotton prices continue to hover at long-term lows, averaging 56.4 cents a pound for the week ended Thursday, according to the U.S. Department of Agriculture.

This continues a pattern that has prices at their lowest levels since 2009, according to Cotton Incorporated, and sets up price challenges for the natural commodity and competing fibers.

USDA noted in its weekly report that the weekly average was down from 56.52 cents last week and 61.62 cents a year earlier. Daily average quotes ranged from a low of 55.83 cents on March 18 to a high of 56.78 cents Wednesday.

Since September, every monthly update to the USDA’s supply and demand figures has featured decreases in world production and consumption, Cotton Inc. noted in its March cotton market analysis report.

In its initial estimate of the upcoming crop year, USDA indicated that production in 2016-17 could increase about 5 percent. Mill demand and trade are expected to hold at levels nearly identical to those in the current season. Although the production-use gap is expected to narrow, mill-use is forecast to exceed production for a second consecutive crop year. This implies a second consecutive decrease in ending stocks. World-ending stocks are projected to hold to levels that are extremely high by historic standards and this should maintain downward pressure on prices, USDA noted.

As has been the case for the past several crop years, a central variable shaping price direction is Chinese government policy, Cotton Inc. noted. Rumors of an impending release from Chinese reserves, with prices significantly below current cash values, are commonly cited as a primary reason that prices around the world have moved lower over the past couple months. No details regarding an upcoming set of auctions have been officially released. If the expectations for the drop in Chinese prices are confirmed, there is potential for Chinese spinning mills to become more competitive internationally and for Chinese mill-use to increase, Cotton Inc. said.

“This should be positive for global cotton usage in the long-term because it suggests Chinese cotton prices will become more competitive with Chinese polyester prices,” Cotton Inc. said.

Lenzing Inc. noted in its annual report this month that world fiber production declined 0.9 percent in 2015 to 94 million tons compared with 2.1 percent growth in 2014 in contrast to an expected 2.7 percent rise in fiber consumption in 2015.

“The main reason for the production decline was the sharp drop in worldwide cotton production, which contracted by 14 percent in 2015 to 22.5 million tons,” Lenzing said. “This can be attributed to the fact that cotton production lost some of its attractiveness compared to other crops due to shrinking margins. Production decreases were also reported for wool — minus 0.6 percent to 1.2 million tons — and other natural fibers — minus 3.7 percent to 4.9 million tons.

In contrast, production of the group of synthetic fibers, as well as wood-based and cellulose fibers continued to expand in line with the upward trend of recent years, Lenzing noted. Output increased by 4.8 percent in 2015 to an estimated 65.5 million tons from 3.8 percent growth in 2014. Production of synthetic fibers rose 5.1 percent from the prior-year level, whereas the production of cellulose fibers was up 1.5 percent, according to Lenzing.

Market prices for viscose fibers significantly recovered in 2015, rising by an annual average of about 5 percent, whereas cotton and polyester selling prices each dropped by more than 20 percent on average, Lenzing noted, adding that starting in the middle of July 2015, viscose fibers were once again more expensive than cotton, the first time this has been the case since 2010. In contrast, selling prices for polyester, which competes with viscose on the marketplace, continuously declined in 2015 due to the sharp drop in crude oil prices.

Fabric firms have had to balance the benefit of lower raw material costs, with the deflationary effect on pricing patterns. International Textile Group reported last week that, “while there has been some volatility in cotton pricing historically, pricing has stabilized over the last 18 months,” helping it plan its production. ITG also noted that margins have been impacted by lower selling prices due to the highly competitive raw material market.