ICAC June Monthly Report: Next Year, Basic Cotton Prices Are Facing Downward Pressure.

In June, the International Cotton Advisory Committee (ICAC) released a forecast of global production and demand. In the past year, Sino US trade disputes have affected cotton demand and supply chain. Starting in July 6, 2018, US cotton and other US agricultural products exported to China will receive an additional 25% tariff. In early May, the United States announced tariffs on imports of Chinese goods to US $200 billion. In response, China announced that it would impose tariffs on us products worth $60 billion starting in June 1, 2019. Although the G20 summit held in Osaka, Japan, at the end of June, created opportunities for resolving trade disputes, the Trump administration's subsidy of $16 billion to US farmers may indicate that the United States has prepared for a long-term Sino US trade war.

In the early June 2018, the A index rose to more than 100 cents. Following the escalation of the Sino US trade dispute, the index fell to about 94 cents in 2018, and in October 2018 to April 2019, the index continued to fall to below 80 cents in February 2019 and then rebounded to 88 cents in April in 2018. Affected by the failure of Sino US trade negotiations in early May and the effect of mutual tariff increases, the A index fell again, reaching an annual low of 76 cents in May 14th.

Although Sino US trade disputes may become a new order of global cotton trade, global cotton consumption in 2019/20 will increase to 26 million 900 thousand tons, India consumption will be 5 million 500 thousand tons, Pakistan 2 million 400 thousand tons, Bangladesh 1 million 800 thousand tons, Vietnam 1 million 600 thousand tons, Turkey 1 million 600 thousand tons. China's consumption is expected to be reduced to 8 million 250 thousand tons, but it is still the largest consumer and importer. Although China's cotton production is expected to be reduced to 5 million 900 thousand tons, cotton imports will still be close to 2 million tons.

In 2019/20, global consumption is expected to grow by 1%, but output is expected to grow by 7% to 27 million 600 thousand tons, ending inventory is expected to increase to 18 million 600 thousand tons, and inventory consumption is 69%. The increase in final inventory, Sino US trade disputes, slowing global economic growth and cotton consumption will bring downward pressure on cotton prices.