The Outbreak Of New Coronavirus Brings New Uncertainty To Cotton Prospects.

The latest data show that in the 2020 cotton planting year, the potential impact of coronavirus has become an unpredictable situation in the global cotton market.

National Cotton Council of the United States (Natio) Nal Cotton Council (NCC) warned that despite the completion of the first phase of the US China trade agreement, improving the cotton economic development situation and providing a cautiously optimistic outlook, but the good times were not constant. In early 2020, the outbreak of the new coronavirus in Wuhan delayed the ability of China to increase cotton purchase in the near future.

In January 15, 2020, President trump of the United States signed the first stage trade agreement with China. As part of the agreement, China has agreed to purchase $4 billion worth of agricultural products from the United States within the next two years, including cotton.

However, NCC said that because the details of the specific commodities had not yet been published, the overall impact on cotton remained uncertain.

NCC Jody Campiche, vice president of economic and policy analysis, pointed out that in 2020, the US cotton planting area was estimated to be 13 million acres in 2019, compared with 5.5% in 2019.

Cotton prices tend to weaken relative to corn and soybean prices, and cotton planting area is expected to decrease. Assuming that the US cotton fallow rate is 13.8%, the total cotton planting area reaches 11 million 200 thousand acres. By 2020, cottonseed output in the United States is expected to be reduced to 6 million 100 thousand tons.

Regarding the amount of cotton used in domestic factories, NCC estimates that the amount of cotton used in the US will be reduced to 2 million 850 thousand bales in 2020.

Campiche explains: "the United States is one of the biggest markets for cotton in the United States, and American factories are crucial to the healthy development of the cotton industry. "In the face of the ever increasing textile imports from Asian suppliers, the US textile industry has been concentrating on investment and technology upgrading to ensure market competitiveness. Recently, the US-Mexico-Canada Agreement (USMCA), which has just passed, includes some important provisions that should help promote the development of the textile industry in the United States. "

As of February 6th, sales reached the highest level in marketing year. Although Brazil still has a competitive edge in the export of cotton, in the 2019 planting year, the United States increased its export opportunities to other cotton sales markets. In particular, Australia, Pakistan and Turkey reduced cotton production, but caused an increase in US cotton exports. Therefore, the United States remained the world's largest cotton exporter in 2019, with a total export volume of 16 million 500 thousand bales.

NCC said that before the tariff was implemented, the United States could gain a favorable position from the growth of China's cotton imports. Through the collection of 25% tariffs, during the 2018 and 2019 marketing year, China chose to turn to other suppliers to gain market share in Brazil, Australia and other countries. In 2019, Vietnam became the largest export market for cotton in the United States, followed by China and Pakistan.

Meanwhile, by the 2020 sales year, US cotton exports will be reduced to 16 million 400 thousand packets. Based on this prospect, it is assumed that in the year 2020, the United States exported 2 million 500 thousand bales of cotton to China, compared to the 2 million package in 2019. However, according to the inventory records outside China, Brazil will increase production and Australia will partially resume production, and the US will continue to face strong export competition in 2020. If combined with the amount of factory in the US, total exports will be lower than expected, and the estimated final inventory will be 5 million 900 thousand bales.

Campiche said that due to the reduction of cotton planting area, global cotton production in 2020 will be reduced by 2 million 400 thousand to 118 million 900 thousand bales. It is estimated that by 2020, the amount of cotton used in factories around the world will increase to 121 million 700 thousand bales. It is estimated that in the end of 2020, the annual inventory will be reduced by 2 million packages to 80 million 100 thousand packages, reaching 66.4% of the inventory utilization ratio. It is estimated that cotton stocks outside China will reach a record level in 2020.