The International Cotton Advisory Committee (ICAC) recently conducted a preliminary assessment of the impact of various countries’ epidemic blockade measures on cotton supply and demand, prices and trade, and looked forward to recovery prospects.
Supply and Demand
ICAC estimates that global cotton production will be 26.2 million tons in 2019/20 and 25.2 million tons in 2020/21, a year-on-year decrease of 4% , the reason is that the fall in cotton prices has led to a reduction in cotton planting area. Affected by the epidemic blockade and trade disputes, global cotton consumption in 2019/20 was 23 million tons. Due to reduced consumption, global cotton ending stocks are expected to rise to 21.8 million tons, with the inventory-to-consumption ratio reaching a record high.
According to a survey by the International Textile Manufacturers Federation (ITMF), the order cancellation rate of global textile companies in 2020 may reach 31%, and operating income will drop by 28%, which means that the global textile industry will lose 300 billion Dollar. Currently, the International Monetary Fund (IMF) predicts that the global economy will contract by 3% in 2020, which will reduce cotton consumption by 11%. However, as GDP growth accelerates, the recovery of cotton consumption is also accelerating. Although the current contraction in global GDP exceeds that of the 2008 financial crisis, this crisis was caused by public health rather than poor financial policies by governments. Therefore, with the correct policy measures, the global economic recovery will be a smooth and stable one. Faster process.
Wide global lockdowns have led to record unemployment and a significant reduction in the retail sales of textiles and clothing. From February to April, retail sales of clothing and apparel in the United States fell by 79%. Although consumers expect short-term economic income to decrease, consumption is expected to increase after the economy recovers, and textile and apparel consumption will rebound by then. Incomes are higher in European and American countries and Japan, which account for 61.5% of global clothing imports, but the wealth of Asian consumers (especially China and South Korea) is also growing. With the end of the epidemic blockade, China has taken the lead in starting to recover, and other Asia The pace of economic recovery will also follow after the country’s control measures are relaxed.
Price
The prevention and control measures in various countries have caused the prices of most commodities to fall. Despite this, agricultural products are less affected by the economy than industrial products, and prices are expected to remain generally stable. Under the influence of rising global ending stocks this year and next year, declining demand for end-use textiles, and falling chemical fiber prices, cotton prices will continue to be under pressure. Cotton prices will continue to be under pressure. As competitiveness declines, its share in fiber consumption will also decline.
Imports
In the first quarter of 2020, textile and clothing imports from the EU, the United States and Japan dropped significantly, and many textile and clothing export orders were canceled or delayed. Major retailers file for bankruptcy. The short-term prospects for the textile and apparel industry are pessimistic. For cotton merchants, the cancellation of export contracts will lead to a loss of trade volume, forcing some cotton merchants to withdraw from cotton trade.
Expectation
The “new normal” resulting from the correct measures and policies adopted by various countries is expected to allow the market to recover moderately, businesses can safely reopen, and the economy Activity can begin to increase. On the contrary, if strict prevention and control measures and policies are still in place, including the public health system, small business and unemployment policies that are still weak or ineffective, the economic recovery will be slow and may take as long as 12-18 months, failing to stimulate The vitality of consumers will cause cotton consumption by cotton mills to continue to shrink severely in 2021.
Currently, ICAC estimates that global cotton production in 2020/21 is expected to be 25.1 million tons. If the global economy declines further and consumption growth slows, ending stocks will continue to increase, putting pressure on cotton prices. In a protracted crisis, food security will become an important issue, and small farmers in developing countries may switch to food cultivation. </p
