Cotton consumption and trade have fallen in the midst of containment measures taken to control the coronavirus pandemic and all major consuming countries have been impacted by retail losses that have led to decreased orders and the closure of mills, the International Cotton Advisory Committee (ICAC) said in its monthly report.
Global consumption for the 2019-20 season is now forecast to be 23 million tons, an 11.3 percent decrease from the previous season. With global production for the current crop year expected to come in at 26.2 million tons–a 2 percent increase from the previous season–ending stock levels are expected to increase to 21.75 million tons, the highest level in the past five seasons, ICAC said.
The high stock levels, low consumption levels and high production levels for the 2020-21 season have put cotton prices under continued pressure, ICAC said. Its current price projection for the year-end 2019-20 average of the A Index of global prices has been revised to 72.8 cents per pound this month. The price projection for the year-end 2020-21 average of the A Index is now 58.8 cents per pound.
U.S. spot cotton prices averaged 53.51 cents per pound for the week ended May 28, according to USDA. This was down from 53.88 cents per pound a week earlier and below the 63.56 cents per pound reported the corresponding week in 2019.
Consumption in China, the world’s leading country for mill-use, is projected to fall 12 percent to 7.25 million tons from the previous season. With lower international cotton prices and as trade negotiations with the U.S. move forward, China’s consumption and import estimate have increased month to month. Cotton imports are now estimated at 1.9 million tons for 2019-20, as manufacturing activity begins to resume and to refresh reserve stocks.
Consumption in India is seen falling 12 percent to 4.75 million tons, according to ICAC. Stocks in India are estimated at 2.8 million tons, a historic high.
With high minimum support prices, a high level of stocks has accumulated, putting downward pressure on domestic and international prices. With consumption slowing across the globe, the continued closure of mills and the reduction of the labor force, domestic mill-use has decreased to the lowest level in seven seasons, according to the Cotton Corporation of India (CCI). An increase in exports is anticipated as the CCI seeks export opportunities in nearby manufacturing countries.
Consumption decreases for 2019-20 are expected across the world, with losses concentrated in Asia and Southeast Asia, ICSC said. Consumption is expected to fall 7 percent in Pakistan to 2.2 million tons, 8 percent in Turkey to 1.4 million tons, 8 percent in Vietnam to 1.4 million tons and 25 percent in Bangladesh to 1.2 million tons.
Consumption in the U.S. is forecast to fall to 580,000 tons in 2019-20, according to the U.S. Department of Agriculture (USDA). Ending stock level in the U.S. is expected to be 1.9 million tons by the end of the crop year, as exports are estimated to fall to 3 million tons, an 8 percent decline from the previous season.
Agricultural support policies for cotton continue and the 2020-21 crop is currently projected at 4.25 million tons on 4.6 million hectares, a 2 percent contraction in planted area, based on USDA estimates.
“Despite low international prices, but with a possible trade deal with China, the United States is expected to export 3 million tons in 2020-21,” ICAC said.
Recovery for the coming season is expected to be modest under the current IMF projections for economic recovery, ICAC noted. In order to recover to the cotton consumption levels of the 2018-19 season at 26 million tons, consumption growth would need to be more than 12 percent. The ICAC’s current consumption projection for 2020-21 is at 23.75 million tons, a 3 percent increase from this season.
