World cotton stocks remain high as the Minimum Support Price (MSP) in India helped push its 2019-20 production to near-record levels, resulting in the government acquiring significant levels of stocks. Moreover, Brazil registered its third consecutive record crop, as most production has shifted to second-crop cotton, which has a lower cost of production.

The US department of agriculture (USDA) Outlook in February of 2020 projected that 2020-21 would be similar to 2019-20, with modest consumption growth and a modest decline in world stocks. Then COVID-19 spurred record downward adjustments to global cotton demand.

Current USDA estimates show global consumption in 2019-20 and 2020-21 together down just under 25 million bales (with 2020-21 down 15 per cent) from the February Outlook projections. "The 2020-21 world production forecast is virtually unchanged, and COVID-19’s negative impact on cotton demand was too late in the season to shift planting decisions away from cotton for most major producing countries This has pushed the stocks-to-use ratio back up into the 90 per cent range," the Foreign Agricultural Service of the USDA said in its August report 'Cotton: World Markets and Trade'.

Looking ahead, with government support programes in the two largest producing countries—China and India—shielding producers somewhat from price volatility, lower prices will have limited impact on global production. "Given that the massive drop in demand in recent months was not price based but due to the impacts of COVID-19, lower cotton prices alone will have little impact on demand. Before global stocks can be drawn down to more traditional levels, end-use demand will have to recover from the current COVID-19-reduced levels," the report added.

Between 1960-61 and 2010-11, the world stocks-to-use ratio stayed between 30 and 60 per cent. However, since 2011-12 the stocks-to-use ratio has not dipped below 65 per cent and has been above 90 per cent four times including the last 2 years.

Fibre2Fashion News Desk (RKS)

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