International cotton prices have rebounded slightly recently, in part because the growth in COVID-19 cases has begun to slow, especially in Europe, but all of this has occurred at a very slow pace.
However, growth is accelerating in the United States and Asia, and Africa is beginning to show signs of deterioration. With poor medical conditions and low testing capabilities in these areas, the South Asian continent could become a time bomb unless drastic action is taken. The market should pay attention to the epidemic in Asia and its impact on spinning, weaving and apparel production. These factories had a large workforce laid off and had no support from Western countries. Now that large retailers around the world are canceling orders and demanding lower order prices and more favorable payment terms, systemic problems may arise in textile production in Asia at any time.
According to last week’s USDA supply and demand forecast, global consumption fell by 7.5 million bales in 2019/20. This reduction was expected, but the market generally expected it to be lower, as long as lockdowns around the world If this continues, future cotton consumption forecasts will be further reduced.
Looking at the production situation of various countries in the new year, the United States Department of Agriculture predicts that the planting area this year will be basically the same as last year. Nonetheless, if calculated based on the historical average yield and farm abandonment rate, under normal weather conditions, US cotton production this year will easily reach 23 million bales, or 5 million tons. Isn’t it scary? Even if bad weather leads to a reduction in production, considering the current gap in global cotton consumption, as long as U.S. cotton production reaches 15 million bales, it will put great pressure on cotton prices.
At present, Brazilian cotton has been sown, and the level is still very high. There is no suspense. Indian cotton farmers have received strong support from CCI this year. Despite the plunge in international cotton prices, strong local market demand will keep cotton production stable. In West Africa, an election year in many places where governments want to support farmers with firm farm-gate prices, cotton remains a stable cash crop with few alternatives.
In short, global cotton production will not be hit as hard as consumption in 2020, which begs the question where all this cotton will go and then have a shock effect on prices. </p
