Cotton prices have been badly hit by the virus pandemic, driven down to a 13-year low at 51.54 cents a pound for the May (spot) contract.
Futures have since recovered to almost 53 cents. Even so, this year cotton prices have fallen by more than 20%.
Producers of fashion clothing in the West are struggling to keep their businesses afloat by offering to churn out face masks.
But cotton-based face masks aren’t recommended for confronting the Covid virus. Medical-grade face masks are made from synthetic fibres.
India will struggle to contain viral spread
Prices should soon start to bounce back, now that China has passed its infection peak.
China became the world leader in cotton production in 2019, narrowly displacing India. But how soon will people want to buy new clothes, in the post-virus aftermath?
So far, India has reported relatively few Covid-19 infections, but academics project that India will have 97,000 to 1.3m cases by mid-May.
With 0.7 hospital beds for every 100,000 people, India will struggle to "flatten the curve" of the rate of infection.
There are about 2,000 cotton mills in India. Cotton production there is bound to be hit. Prior to the virus spread the OECD projected that global mill use would grow by 0.7% a year out to 2028.
Lower US planting will underpin price rises
The US remains the world’s biggest exporter of cotton. What its farmers in 17 cotton-growing states decide to do this year will impact production and hence cotton use.
The 10m bales or more of cotton that the US on average annually exports account for some 30% of the global total and mostly are delivered to Asia (the top three being Vietnam, China and Pakistan), Mexico and Turkey.
In its latest weekly report (19 March) the US National Cotton Council (NCC) estimates that the US total acreage planted to cotton in 2020 will fall by 5.5% against last season.
Given the virus outbreak in China and elsewhere in Asia, and the enforced closure of retail outlets in the US and Europe, we expect this acreage to decline even more in the coming weeks. US cotton farmers can plant as late as the start of June in northern areas of the Cotton Belt.
Demand destruction for all manner of cotton-based products has obviously happened.
How long might it last? If the virus can be quickly suppressed in the West - and the massive liquidity injections by central banks and governments are seen to be working - then an upsurge in demand is to be expected.
And then ending stocks, which the NCC puts at about 5m 480-pound bales, would start to look tight.