Global cotton Index falls in 2020

The Cot look-A index has reported a sharp decline in the cotton prices for 2020. The prices slipped to 63.53-81.02 cents per pound in 2020 compared to the prices of 70.75-87.25 cents per pound in the prior year. The index remained in between 65.00-70.00 cents per pound from March-August 2020 and was lowest in April at 63.53 cents per pound. The cotton prices moved down with decrease in global cotton demand by 7.60 million bales, or 6.40 per cent in March 2020, according to United States Department of Agriculture’s (USDA). The reduction was due to Covid-19 impacts on countries around the world. It represented a loss of around 3.5 weeks of global spinning or about 16.00 per cent of the expected spinning in March through July based on the March USDA forecasts. The USDA report also noted that Covid-19-driven changes in behavior and regulations significantly impacted the supply chain of the cotton sector. Recent travel restrictions in India, Pakistan, and Vietnam were likely to have similar impacts on cotton supply and demand in the short-term. In addition to physical disruption across the global supply chain from farm to retailer, global cotton end-use had slipped amidst large portions of the global population limiting activity outside their homes or confined by stay-at-home orders and with many “non-essential” businesses including apparel stores closed. The two largest importers of apparel, EU and US, saw a widespread closure of shopping malls and retail stores, while three-quarters of US population were under travel restrictions. Cotton index has continuously recovered from October 2020 to December 2020 with 14.48 per cent growth from 70.77 – 81.02 cents per pound as all international benchmark cotton prices increased in that period, according to Cotton Market Fundamentals & Price Outlook released by Cotton Incorporated. The largest increase was in China of which a portion was attributed to speculative forces. These include multiple concerns centered on the availability of high-quality fibre to Chinese mills, the challenging weather in Xinjiang for harvest and an unofficial ban on Australian cotton fibre. In addition, US crop suffered a series of hurricanes that passed over a lot of acres with exposed bolls impacting the fibre quality. Beyond quality-related concerns, the outlook for trade-related demand has also improved for a range of reasons, the report said. The USDA and US Office of the Trade Representative released an update on agricultural trade in late October 2020 which indicated that in bale terms, US cotton commitment to China was twice in 2020-21 at 3.60 million bales compared to 1.90 million bales in 2019-20. Outside China, another contributor to import demand was the difficulty suffered by the Pakistani crop this season. The current forecast for the Pakistani harvest remains at 5.00 million bales. Collectively, the issues associated with production and international trade could be considered sources of support for prices.

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