Global cotton prices now exceed pre-pandemic levels: USDA

COVID-19 has dramatically impacted nearly every sector of the global economy, and the cotton sector is no exception. To provide an overview of the impact, the Foreign Agricultural Service of the USDA has in its latest report compared the February 2020 USDA forecasts for 2019-20 and 2020-21 (presented at the USDA Outlook Forum) with this month’s forecasts.

"The February 2020 USDA forecast for world cotton use in 2020-21 was 121 million bales, up 1.7 per cent from the 2019-20 forecast that same month. As the extent of the COVID-19 impacts became clearer, the 2020-21 world use forecast was slashed. However, as components of the world economy have recovered, use has edged up in recent months and is now only 3 per cent below February," says the December 2020 report 'Cotton: World Markets and Trade'.

The forecast for world cotton use in 2019-20 fell 14 per cent between the February and December forecasts as spinning mills dramatically reduced operations. While the onset of COVID-19 impacts varied by country, forecast 2019-20 mill use was reduced in all major spinning countries. Monthly use fell by around 90 per cent in the United States, China, Pakistan, and India from the previous year at its worst in the year.

However, the pandemic’s timing has limited its impact on cotton lint production; for example, the 2019-20 crop was already harvested in most Northern Hemisphere countries and well developed in the rest of the world. In addition, there has been remarkably little impact on 2020 plantings outside of West Africa: the 2020-21 crop forecast has largely been driven by weather and pest concerns, with lower production in Pakistan, the United States, Greece, Mali, and Turkey.

With global cotton use forecast down, and production largely unaffected, 2020-21 ending stocks are forecast higher at 97.5 million bales, 19 per cent (15.4 million bales) above the February Outlook.

The reduction in world use is comparable to those experienced in the Global Financial Crisis (GFC) of 2007-08 and cotton price shock of 2010. However, there are differences. The GFC developed much more slowly, and as a result production responded to lower prices and global stocks did not experience a large buildup. The price shock of 2010 resulted in a large production response, which, coupled with the decline in demand, resulted in an even larger buildup of global stocks than is seen thus far in the pandemic. "As with these previous shocks, it will likely take several years for the global cotton sector to fully recover from the pandemic," the report concludes.

Fibre2Fashion News Desk (RKS)