Impact Of The Outbreak On Cotton Consumption And Cotton Production May Be Reduced

2020/3/31 11:37:00 0

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Epidemic Situation Cotton Consumption Cotton Production

Last week (March 23-27), ICE futures temporarily slumped and the price narrowed above 50 cents, trying to strike a balance between the serious impact of the epidemic on cotton consumption and possible reduction in cotton production and the possible recovery of cotton demand after the global epidemic. Despite unprecedented economic stimulus packages, cotton prices have been temporarily breather, but how long can the stock market last long after the epidemic is accelerating? As of March 30th, the number of confirmed cases in the United States has exceeded 140 thousand.

At present, textile businesses around the world are forced to close in most places. China and India account for about 80% of the world's cotton textile industry. More than half of the cotton spinning industry is closed for at least two to three weeks. India has announced that it will stop all business activities for at least three weeks. Factories in Pakistan, Bangladesh and many Turkey have also been closed, and Vietnam is basically open.

For textile industry, the most obvious impact is the cancellation and postponement of orders by brands and retailers, which brings chain reaction to the entire supply chain. In the past two weeks, measures to seal up the country have brought immeasurable impact on retail consumption and logistics and transportation, resulting in high inventory and tight funds in textile mills. The textile supply chain will take at least 2-4 months to recover. Although the epidemic will eventually disappear, it now appears to take at least a few months, rather than just a few weeks.

This week, the US Department of agriculture will issue the intention area of US cotton. It is generally expected that the US cotton area will be reduced by 10-15%. Cotton farmers are likely to replant crops such as corn, soybeans, sorghum and peanuts. This is good for the market, but the problem of cotton supply will hardly affect the market if global consumption is likely to drop by 10-15%. US cotton export sales are still very active. It is estimated that most of the remaining sales will be transferred to the next year at a certain time in the future.

Overall, the cotton market seems to be on the footing after falling about 20 cents in about 20 days, at least for the new contract in December. Nevertheless, the downside risk of cotton prices can not be ruled out. The most affected contracts this year (May and July) may still fall by 5 cents, but the December contract should remain above 50 cents.