India Cotton High Inventory Next Year Cotton Prices Under Pressure

The US Department of agriculture forecast supply and demand analysis in June. Although India cotton consumption is expected to revive after the new crown epidemic, 2020/21 India cotton end inventory is expected to reach a new high over 2019/20.

In 2019/20, when cotton production reached a high level of nearly six years, consumption decreased by 4 million packages and exports fell sharply, India's cotton stocks were expected to double by the same period last year, resulting in a drop in spot prices in India over 20% over the same period last year, making the export price of India cotton much lower than that of its varieties.

In the first 6 months of this year, cotton exports in India dropped by nearly 20% compared with the same period last year. In the past five years, nearly 40% of the cotton exports were completed in December -1. The closure of the India Pakistan border in 2019 seriously affected the export of India cotton and the quality of India cotton, which kept India cotton prices at the lowest level in the world. Since this year, the price of grade cotton in India is much lower than that of the same grade cotton and Brazil cotton.

In the first seven months of this year, the export of India's cotton yarn decreased by more than 15% over the same period last year. Last year, China was the largest buyer of India cotton yarn, but the demand for yarn was greatly reduced, and the market share of India's cotton yarn also declined. From August 2019 to April 2020, China's imports of cotton yarn to India were almost cut short.

At the same time, affected by the epidemic, cotton consumption in India is also the second largest drop in China's consumption. From mid 3 to mid May, the opening rate of India cotton mill has dropped sharply. Even before the outbreak, cotton demand in India was very limited, and cotton consumption in 2019/20 did not increase substantially compared with the same period last year.

In addition, India cotton end inventory increase and MSP lowest price acquisition reasons. Since this year, the Cotton Corp of India has acquired over 7 million bales of cotton, plus the previous purchase of Chen cotton, and its social inventory will exceed 8 million bags. To stimulate domestic demand, CCI is selling stocks at a low price.

In 2020/21, the price of India MSP will continue to rise, and the supply of India cotton will be guaranteed. Moreover, India's cotton consumption can not offset the increase in inventory and become the main force in increasing global cotton inventories. Since CCI accounts for nearly half of the inventory at the beginning of the year and will continue to purchase large quantities next year, the digestion of CCI inventory before the end of this year is worth paying attention to. At present, Brazil cotton stocks are the highest in history. The US cotton inventory is the highest in 12 years. The increase of India cotton stocks will bring pressure to the international cotton price in 2020/21.