Cotton is the most valuable product of the textile and fashion industry. Since the beginning of the textile industry, cotton has always been the game-changer. Cotton fits into any textile and apparel products like no other fabric.
The global cotton market has always been volatile. All the trade wars happening around the globe reflect in the price of cotton. At the beginning of June 2018, the cotton price was impacted by the USA's increased duties in the US-China trade war. Then, the price went down in August/September of the same year as trading tension increased due to high import duties and counter duties.
The next decline in cotton prices was in the period between October 2018 and April 2019. In May 2019, the negotiations to settle the dispute caused the cotton price to reach only 76 ct/lb, and in the next two months, the quotation was valued at 78.50 ct/lb on July 24.
Despite the trade dispute, the global cotton consumption is increasing irrespective of price. According to the International Cotton Advisory Committee (ICAC), global consumption was expected to increase by 1 percent to 26.9 million tonnes in 2019-2020.
The global cotton production is expected to reach 27.6 million tonnes in the year 2020. That's an increase of 7 percent.
Let's discuss the current cotton price, supply, demand, and trade in detail.
The price of cotton has been stable since the last few months, and the variation in prices was quite low. And the global cotton consumption dropped by 6.4 percent in April 2020 compared to March 2020. The current forecast of cotton demand across the world is at 111 million bales, while the supply of cotton is relatively high at 122 million bales.
- A cot look A Index climbed from 68 to 70 cents/ lb. In July, the price was recorded 67.15 cents/lb, and for August, it is predicted to reach 67.95 cents/lb.
- The price of Shankar-6 is steady at around 57 cents/lb. In domestic terms, the value decreased from 34,700 INR/candy to 33,800 INR/candy. In August, the price is expected to reach 34,000 INR/candy.
- The China Cotton Index (CC Index 3128B) held near 78 cents/lb. In other terms, prices held near 12,000 RMB/ton. In July 2020, the price was increased to 12,102 RMB/ton, which is predicted to increase in August and reach 12,350 RMB/ton.
The Brazil Cotton Index (BCI) reached 55.52 Cents/Pound in July after a great decline in April. The BCI price is projected to reach 55.66 in August 2020.
The cotton market has fallen drastically in the year 2020. Here are the factors responsible for cotton prices.
Cotton Supply & Demand
The coronavirus pandemic has decreased the global cotton production for 2020-2021. Although the situation is getting better, figures for global mill-use were mostly unchanged. The production is low, and so the supply.
The destruction of demand also has raised in the year 2020 due to the changed consumer behavior and economic contraction. And the pandemic situation will also be seen in the coming year 2021.
Though the entire nation is optimistic, things can take turns anytime.
As a result, the global cotton area is expected to decline by 4 percent and reach 33 million hectares in 2020-2021. Global cotton production for this period is expected at 25 million tonnes, 4 percent lower from the current season due to a contraction in area.
In the global contracting economy, cotton consumption is expected to reach 23.2 million tonnes. As production exceeds consumption, stock levels are expected to increase, putting additional pressure on cotton prices.
Read More on: Cotton Market Report and Price Trends
The Price Outlook
Due to the low production and consumption, the cotton crop has also fallen, and so the export. The cotton area is expected to be slightly lower this season as a relative price for competing crops.
However, the cotton prices have decreased since early March, and since then, the market is struggling to go back to normal.
The downwards trend of cotton was initiated with the coronavirus pandemic, and the initial phase has passed. But the impact could stay longer than expected in the initial phase.
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