While the world is focusing on the initial results of Sino-US economic and trade negotiations, another thing, although temporarily forgotten by the market, is quietly being put on the agenda. How much will the US cotton planting area decrease in 2020? Have the current low prices and the Sino-US trade war caused cotton farmers to lose confidence?
According to analysis by well-known U.S. cotton experts, although the U.S. cotton area dropped to 14 million acres in 2019, a year-on-year decrease of 2.7%, the U.S. cotton area may further decrease to less than 11 million acres in 2020, a year-on-year decrease 3 million acres.
John Robinson, a cotton economics expert at Texas A&M University in the United States, believes that Sino-US economic and trade issues and the reduction of US cotton area are the two key factors that will determine the overall situation of the cotton market in 2020.
First of all, Sino-US economic and trade relations are the biggest uncertain factor. They may get worse or get better. The Sino-US trade war has led to a significant decline in cotton demand and long-term sluggishness. Even if the trade war ends in 2020, Sino-US economic and trade relations will only begin to repair rather than return to their original state. The market will not remain at a high level after rising, but It rose and then fell again. The cotton market will take a long time to repair and will not return to its original highs all at once. Cotton prices have been trending like this in the past few years, and 2020 will be no exception.
Secondly, the possible decrease in the US cotton area may have a major impact on the cotton market in 2020. A reduction in U.S. cotton acreage is more likely to boost cotton prices in 2020 than anything else. At present, the US cotton area is expected to decrease by 2-3 million acres in 2020. If so, U.S. cotton ending stocks will continue to decrease by several million bales, providing support for cotton prices. Robinson himself predicts that the cotton area planted in the United States in 2020 will be less than 11 million acres, about 10-10.5 million acres, far lower than the nearly 14 million acres in 2019. However, the single most pressing question for U.S. cotton farmers in 2020 is how much other growers will cut acreage and what that will do to U.S. ending stocks.
The head of the National Cotton Council (NCC) of the United States said that the current trade dispute and high tariffs on U.S. cotton have had a very negative impact on the U.S. cotton industry. The market share of U.S. cotton in China has increased from 2016 to 2016. /17 and 2017/18 fell from 45% to 18% in 2018, while Brazil’s market share increased from 7% in 2017/18 to 23% in 2018/19. The decline in market share led to US cotton The overall decline in exports has put pressure on U.S. cotton prices. At the same time, global cotton demand decreased in 2018/19 and 2019/20. Before the Sino-US trade war, the USDA estimated that global cotton consumption was close to a record high of 128 million bales. However, starting in September 2018, USDA continued to lower global cotton consumption, and global consumption was reduced to 120 million bales in 2018/19. , a reduction of 8 million bales, to only 121.5 million bales in 2019/20, which is also 4 million less than the forecast in May this year, and may continue to be lowered in the future.
NCC stated that until the Sino-US trade war is not completely resolved, global cotton consumption will remain sluggish, and more export contracts may be canceled in 2019/20 or transferred to 2020/21. NCC analysis believes that based on the December 2020 contract price from November to December this year, the US cotton area may decrease in 2020, but the specific reduction depends on the trend of the December 2020 contract. The current December 2020 contract is at 68 cents Nearby, the price relationship between cotton and corn, cotton and soybeans is very important for judging the US cotton area.
NCC stated that there are three major uncertainties in the cotton market in 2020. One is whether the Sino-US trade negotiations will be resolved and China may potentially increase its imports of US cotton. The second is that if the trade war is properly resolved, cotton demand is expected to gradually increase. Recovery, and the third is whether there are major problems with cotton production outside the United States. </p
