ICAC: The Impact Of The Epidemic On The Cotton Market And Its Prospects

The International Cotton Advisory Committee (ICAC) recently assessed the impact of various countries' outbreaks on cotton supply and demand, prices and trade, and forecasted the prospects for recovery.

supply and demand

ICAC predicts that the world's cotton production in will be 26 million 200 thousand tons, and 2020/21 will be 25 million 200 thousand tons, a decrease of 4% over the same period last year. The reason is that the decline in cotton prices will lead to a reduction in cotton planting area. Affected by the closure of the epidemic and trade disputes, global cotton consumption in 2019/20 was 23 million tons. Due to reduced consumption, the end of the world cotton inventory is expected to rise to 21 million 800 thousand tons, inventory consumption ratio is a record high.

According to a survey conducted by the International Federation of textile manufacturers (ITMF), the global textile enterprises' orders in 2020 were canceled by 31% or by 28%, which means that the global textile industry will lose 300 billion US dollars. At present, the International Monetary Fund (IMF) expects the global economy to shrink by 3% in 2020, which will reduce cotton consumption by 11%. But with the acceleration of GDP growth, the recovery of cotton consumption is also accelerating. Although the current global GDP contraction exceeds the 2008 financial crisis, this crisis is triggered by public health rather than the financial policies of various governments. Therefore, under the correct policy measures, the recovery of the global economy will be a smooth and rapid process.

Global blockade has led to a record high unemployment rate, and retail sales of textile and clothing have decreased significantly. In 2-4, clothing and apparel retail sales in the United States dropped by 79%. Although consumers expect short-term economic income to decrease, consumption is expected to increase after the economic recovery, when textile and clothing consumption will rebound. Europe and the United States and Japan account for 61.5% of the world's clothing imports, but the wealth of Asian consumers, especially China and South Korea, is also growing. With the end of the epidemic, China has already taken the lead in recovery, and the pace of economic recovery will follow after the relaxation of control measures in other Asian countries.

Price

National control measures led to a fall in most commodity prices. Nevertheless, the price of agricultural products is smaller than that of industrial products, and the price is expected to remain stable. Under the influence of the end of the year inventory, the demand for terminal textiles and the decline of chemical fiber prices, cotton prices will continue to bear pressure, and the competitiveness of cotton will decline, and the proportion of fiber consumption will also decline.

Imported

In the first quarter of 2020, the import volume of textiles and garments in the European Union, the United States and Japan dropped significantly. Many textile and garment export orders were cancelled or delayed, and the main retailers applied for bankruptcy. The short-term outlook for the textile and garment industry is pessimistic. For cotton traders, the cancellation of export contracts will lead to the loss of trade volume, forcing some cotton traders to withdraw from cotton trade.

Expect

The "new normal" generated by the correct measures and policies of various countries is expected to restore the market to a moderate degree, enterprises can safely reopen and economic activities can begin to increase. On the contrary, if there are still stringent preventive measures and policies, including the public health system, small businesses and unemployment policies are still weak or ineffective, the economic recovery will be relatively slow, and the time may be 12-18 months, which can not stimulate the vitality of consumers, leading to the continued shrinkage of cotton mill in 2021.

At present, ICAC predicts that the global cotton output in 2020/21 is expected to be 25 million 100 thousand tons. If the global economy further falls and consumption growth is slow, the end inventory will continue to increase, which will bring pressure on cotton prices. In a prolonged crisis, food security will become an important issue, and small farmers in developing countries may replant their crops.