Global cotton consumption likely to fall 11.8%

In what could spell some worries for cotton growers in India, the largest producer, the International Cotton Advisory Committee (ICAC) has projected a bleak consumption outlook for the fibre crop in 2020-21. ICAC has projected that cotton offtake is set to shrink by 11.8 per cent as bleak economic conditions triggered by Covid-19 containment measures across the globe, coupled with unprecedented shifts in the labour market and growing unemployment, have dented the consumption spirit.

While this bleak consumption outlook may push cotton growers away from the fibre crop, it will also put a pressure on the prices, which is estimated to average at 56.9 cents per pound for 2020-21 as against the average of 71.4 cents for 2019-20.

ICAC, in its latest update for May, maintained that India will continue to lead the world in cotton area “despite an expected area contraction to 12 million hectares with prices lower than competing crops in the area.” India's cotton area for 2019-20 was reported at 12.7 million hectares.

Lower yields

ICAC added that the yields in India are expected to be lower in 2020-21 as a result of delayed sowing and the containment measures to control the pandemic. Serious implications of the Covid-19 crisis will be clearly visible across the cotton value chain and consumer demand.

“As containment measures remain across countries, effectively halting the global economy, global cotton consumption has been revised down to 22.9 million tonnes, an 11.8 per cent decrease from the previous season. With supply chains fractured and consumption demand low, global trade has been revised down to 8.26 million tonnes,” ICAC noted.

On the area and production of cotton globally, ICAC predicts it to decline in 2020-21 due to uncertainty across the growing regions and trade disruptions as it is set to impact the farmer planting decisions.

As a result, the global area under cotton is expected to decline in 2020-21 by 4 per cent to 33 million hectares. Global production for the period is expected at 25 million tonnes, 4 per cent lower from the current season due to a contraction in area. Cotton consumption for the year is expected at 23.2 million tonnes. With production exceeding consumption in a contracting global economy, stock levels are expected to increase, putting additional pressure on prices.

Revised price projection

“The Secretariat’s current price projection for the year-end 2019/20 average of the A Index has been revised to 71.4 cents per pound this month. The price projection for the year-end 2020/21 average of the A Index is 56.9 cents per pound this month,” it added.

For China, ICAC expects total cotton area to fall to 3.08 million hectares for 2020-21 from 3.30 million hectares last year. For the US, the area is expected to remain near the last year's level of 4.7 million hectares despite pressure on prices.

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