Market Analysis: The Global Cotton Planting Area Is Expected To Decline In The Next Two Years

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China's cotton output is expected to be 26.9 million bales, a year-on-year decrease of 600000 bales. The survey shows that China's intended cotton planting area is expected to decline by about 2% in 2024, with little change in unit yield. Xinjiang's per unit yield has an upward trend. After a decrease of about 4% this year, the cotton yield per unit area in Xinjiang is expected to return to the average level of the previous three years.

India's cotton output is expected to decrease by 500000 bales to 24.5 million bales. Due to the unsatisfactory domestic cotton price, India's cotton planting area is expected to decrease again to 12.1 million hectares, a year-on-year decrease of about 5%. In recent years, India's cotton yield per unit area has varied greatly, mainly due to unstable monsoon rains and persistent pest problems. Nevertheless, the cotton area in India is expected to grow by 3% year on year based on the average of the past five years.

Although Pakistan's planting area is expected to remain stable, its cotton output is expected to decrease by 600000 bales. In recent years, the cotton yield of this country has changed the most among all cotton producing countries. Based on the average value of the past five years, the unit yield of cotton in 2024/25 is expected to decline by 10% year on year. The overall trend of cotton planting area in Pakistan is declining. However, the cotton planting area in 2023/24 rebounded strongly, and the planting in the new year is being actively promoted. Therefore, the cotton planting area in Pakistan is expected to remain stable, and the output is expected to be slightly higher than 6 million bales, basically equivalent to the year before the flood.

The cotton planting trend in Australia is more obvious than that in other countries. If the rainfall condition only keeps normal, the water storage condition of the country will keep a downward trend, leading to the reduction of irrigated field area for the second consecutive year, and the dry land area will also decrease. It is estimated that the cotton planting area in Australia will decrease by more than 10% year on year, and the output is expected to decline by 300000 bales to 4.5 million bales.

Turkey's cotton planting area is expected to increase by more than 10%. If the weather situation is further improved, the unit yield is expected to increase by more than 10%, and the output is expected to reach 4 million bales, an increase of 800000 bales year on year, which is the largest growth among all cotton producing countries except the United States.

The cotton output in Greece is expected to increase by 400000 bales. The heavy rainfall in September last year led to the abandonment of cotton in a large area and the decline of unit yield. If the weather returns to normal, the output is expected to rise to 1.45 million bales.

The cotton planting in Brazil is about to end, and the area is expected to increase year on year, and the unit yield is expected to be lower than the historical peak last year, but it is still in an overall upward trend, so the output is expected to reach 15 million bales, with a year-on-year increase of 400000 bales. In the past ten years, Brazil's cotton output increased by nearly 90% and its export volume increased by about 200%.

In 2024/25, the global cotton consumption is expected to be 116 million bales, the highest level in three years, with a year-on-year increase of 3.5 million bales, or 3.1%, twice the historical long-term level. After reaching 124.2 million bales in 2020/21, global cotton consumption stagnated, with an average of only 112 million bales in the first two years. In 2024/25, with the decline of the interest rate of the Federal Reserve, the dollar index and global inflation, the global macroeconomic environment is expected to improve, the overall financing costs of various countries will decline, and the pressure on importing countries to open letters of credit will ease. These factors will promote the growth of cotton consumption faster than in previous years.

For cotton consumption, the most critical factor is that by August 2024, the inventory of supply chain channels is expected to decline significantly year on year. From the recent global cotton consumption and cotton product import data, we can see that the supply of the global cotton industry chain has been significantly lower than the level of the previous two years. In 2023, the orders of clothing retailers will decrease significantly, which will bring continuous pressure to the consumption in 2023/24. Since the shopping season in the autumn and winter of 2022, clothing retailers have begun to seek to reduce inventory pressure. Especially when the U.S. economy is at risk of recession, retailers are very cautious in their purchases. For the United States, the largest importer of cotton products, increased consumer spending, lower unemployment and faster wage growth continue to provide support for strong clothing purchases.

As in the previous year, the elasticity of consumer demand in 2023 is amazing, because the GDP growth of the United States exceeded expectations. In the World Economic Outlook forecast in January, the International Monetary Fund adjusted the global GDP growth in 2023 and 2024, which is expected to be 3.2% in 2025 and 3.1% in 2024. The EU and other developed economies are expected to make major contributions to global economic growth, while the economic growth of the United States and China is expected to slow down.

At the same time, the increase in global cotton supply will also promote cotton consumption. The total global cotton initial inventory and output will reach the highest level since 2020/21, more than 200 million bales. Increased cotton supply and more stable operating costs of cotton mills will also provide support for cotton consumption. Since the beginning of 2022, the global cotton supply has continued to be insufficient. Superimposed by the soaring energy prices and the accelerated rise of US dollar interest rates, cotton consumption has been under great pressure. Since 2022, the lagging effect of high cotton prices and high interest rates have led to pressure on cotton product consumption. However, the recent forecast of the International Monetary Fund shows that in 2024 and 2025, the energy prices and interest rates of major economies in the world will decline year on year, and will be significantly lower than the level in 2022.

In 2024/25, the growth of cotton consumption still has potential negative factors, including whether the growth rate of consumption can reach the decline rate of interest rates, especially in the United States. Other issues, including regional conflicts in Russia, Ukraine and the Middle East, have always been an important risk to consumption growth. In addition, the market also has concerns about the world's two largest economies, such as China's real estate problem, and the possibility of a mild economic recession caused by the continued high interest rates in the United States. In addition, the decline of economic activities in the EU and the UK also makes procurement behavior uncertain.

In 2024/25, the global cotton trade volume is expected to further increase. Although China's import volume is expected to decrease, the consumption of other countries is expected to increase. Therefore, China's cotton import demand is expected to remain at a high level. In addition, the increased output of exporting countries (the United States and Brazil) will also meet China's growing import demand. Therefore, the global cotton import volume is expected to grow by nearly 6%, reaching 45.3 million bales.

In 2024/25, the global cotton ending inventory is expected to continue to rise, but the inventory consumption ratio is expected to decline slightly. The global ending inventory is expected to be 84.6 million packages, an increase of 900000 packages year on year, but the inventory consumption ratio is expected to be 73%, down 1.5 percentage points year on year. Due to the decline of inventory consumption ratio, cotton prices in the United States and the world are expected to rise, and the average value of the Cotruke A index is expected to rise by 3 cents to 97.5 cents per pound.