The USDA’s June supply and demand forecast analysis believes that although India’s cotton consumption is expected to recover after the new crown epidemic, the ending inventory of Indian cotton in 2020/21 is expected to reach a new high exceeding that in 2019/20.
In 2019/20, cotton production hit a six-year high and consumption dropped by 4 million bales. , With exports declining sharply, Indian cotton stocks are expected to double year-on-year, causing India’s domestic spot prices to fall by more than 20% year-on-year, making Indian cotton export prices significantly lower than other varieties.
In the first six months of this year, India’s cotton exports fell by nearly 20% year-on-year. Judging from the situation in the past five years, nearly 40% of cotton was exported from December to January. The closure of the India-Pakistan border in 2019 has seriously affected the export of Indian cotton. Coupled with the quality problems of Indian cotton, the price of Indian cotton continues to be at the lowest level in the world. Since this year, the quotations of Indian mid-grade cotton have been much lower than those of the same grades of US cotton and Brazilian cotton.
In the first seven months of this year, India’s cotton yarn exports fell by more than 15% year-on-year. Last year, China was the largest buyer of Indian cotton yarn, but the demand for yarn dropped significantly, and the market share of Indian cotton yarn also declined. decline. From August 2019 to April 2020, China’s cotton yarn imports from India were almost halved.
At the same time, affected by the epidemic, the decline in cotton consumption in India was second only to China. From mid-to-late March to mid-May, the operating rate of Indian yarn mills dropped significantly. Even before the outbreak, India’s domestic demand for cotton yarn was very limited, and cotton consumption in 2019/20 basically did not increase year-on-year.
In addition, the large increase in Indian cotton ending stocks is also due to MSP’s lowest price purchase. Since the beginning of this year, the Indian Cotton Company has purchased more than 7 million bales of cotton. Including the old cotton purchased previously, the social inventory will exceed 8 million bales. To stimulate domestic demand, CCI is selling inventory at low prices.
In 2020/21, India’s MSP price will continue to increase, and Indian cotton supply will be guaranteed. Moreover, Indian cotton consumption cannot offset the increased inventory, becoming the main force behind the increase in global cotton inventories. Since CCI’s inventory accounts for nearly half of the initial inventory, and a large number of purchases will continue next year, the digestion of CCI’s inventory before the end of this year deserves attention. Currently, Brazilian cotton inventory is the highest in history, and US cotton inventory is the highest in 12 years. The increase in Indian cotton inventory will put pressure on international cotton prices in 2020/21.
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