The 2018-2019 season is turning into a perfect storm, with China at its vortex, for the global cotton industry, and prices are certain to rise.
The International Cotton Advisory Council’s (ICAC) October report said declines are expected in cotton area, yields, production and stocks. This has contributed to a projected rise in the Cotlook A index, an average of global cotton prices, to 90 cents per pound compared to 88 cents per pound during 2017-2018.
In the United States, spot prices averaged 74.96 cents per pound for the week ending Sept. 27, 2018, down from 76.10 cents per pound a week earlier, but up from 67.34 cents per pound in the year-ago period, according to the U.S. Department of Agriculture (USDA). While the Carolinas and Virginia represent about 6 percent of U.S. cotton cultivation, and Hurricane Florence came rather late in the growing season, damage done to crops and fields could cut into supply and add price pressure in the near term. The USDA said clean-up efforts were under way and producers continued to assess damage from the storm.
“Reports indicated heavy yield losses in these areas, as cotton was blown out of the boll or strung out from storm winds,” the USDA said. “Local experts also reported seed sprouting in bolls that were drenched from the storm. In Virginia, fieldwork remained at a standstill due to wet conditions. Elsewhere in the Carolinas, defoliation was expanding and harvesting was under way in the earliest-planted fields.”
ICAC’s report projected global cotton area to fall 2 percent, to 33.4 million hectares, while yields are expected to decline 1 percent, to 777 kilograms per hectare, remaining close to the 10-year average of 770 kilograms per hectare. The forecast is for global production to fall 4 percent, to 26 million tons, and worldwide stocks are seen declining to 17.2 million tons.
“The decrease in stocks comes from China, with the rest of the world’s inventory remaining steady at 10.2 million tons,” ICAC said. “With only 7.1 million tons in its warehouses, the lowest number since 2011-12, China is expected to import 2 million tons of fiber for its mills in 2018-19.”
India will remain the leader in cotton plantings with 11.9 million hectares, even with an expected 2 percent falloff, according to the report. The United States is expected to remain the top exporter at 3.5 million tons, and the second- and third-largest importers after China are expected to be Bangladesh and Vietnam, at 1.8 million tons and 1.7 million tons, respectively, ICAC said.