Is The International Cotton Price Rising Or Falling Next Year?

Recently, the international cotton price rebounded slightly, partly because the growth of new crown pneumonia cases began to slow down, especially in Europe, but all of them appeared at a very slow rate.

However, growth in the US and Asia is accelerating, and signs of deterioration are beginning to emerge in Africa. Because of the poor medical conditions and low test ability in these areas, the South Asian continent may become a time bomb unless strict action is taken. The market should be concerned about the epidemic in Asia and its impact on spinning, weaving and clothing production. These factories have a large number of labor force sacked and no support from western countries. Now that large retailers in the world are cancelling orders, demanding lower order prices and more favorable payment terms, textile production in Asia is likely to have systemic problems at any time.

According to last week's USDA supply and demand forecast, global consumption in 2019/20 decreased by 7 million 500 thousand packages. This reduction is expected, but the market generally believes that it will be lower. As long as the blockade continues around the world, the forecast of cotton consumption in the future will be further reduced.

Judging from the new annual production of each country, the US Department of agriculture predicts that this year's planting area will be basically the same as last year. Nevertheless, if calculated according to the historical average yield per unit area and the rate of abandonment, under the normal weather conditions, the output of US cotton will reach 23 million packs this year, that is, 5 million tons. Is it scary? Even if the weather is not good enough to lead to a reduction in production, taking into account the difference between the current global cotton consumption, the US cotton production as long as reaching 15 million packages will give the cotton price a great pressure.

At present, Brazil cotton has been sown, and is still very high level. India cotton growers have been strongly supported by CCI this year. Despite the sharp fall in international cotton prices, strong local demand will keep cotton production stable. In West Africa, elections are held in many places. The governments of these countries hope to support farmers with firm farm prices. Cotton is still a stable cash crop, with few other options.

In short, the global cotton production in 2020 will not be as strongly affected as consumption. This raises the question of where all these cotton will go, and then will have a knock on effect on prices.