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Hopes rise for cotton demand in top two consuming countries

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US officials nudged higher forecasts for cotton demand in the world’s top two consuming countries, chiming with an upgraded estimate from the International Cotton Advisory Committee of global use.

 

The US Department of Agriculture’s Beijing bureau pegged Chinese cotton consumption in 2020-21, as started this month, at 36.75m bales (8.00m tonnes), some 250,000 bales above Washington’s official estimate.

 

In New Delhi, USDA staff pegged consumption this season at 23.0m 480-pound bales, 500,000 tonnes above the department’s official forecast, and meaning a recovery of 3.0m bales from last season, when global textiles demand was dramatically undermined by the coronavirus pandemic.

 

The estimated for the top two cotton using countries – responsible between them for more than half of world consumption - tallied with an upgrade on Tuesday of some 1.8m bales, to 111.6m bales, in the International Cotton Advisory Committee’s forecast for world demand in 2020-21.

 

‘Some positive signs’

The ICAC said: “There are some positive signs to feel optimistic about - spinning mills in Vietnam, Bangladesh and India were up to 75% capacity in July, for example,” after capacity closures prompted by lockdowns and a slump in export orders during the peak of Covid-19 concerns.

 

The committee raised to 67 cents a pound, from 62.8 cents a pound, its forecast for this season’s average cotton price, as measured by the Cotlook A index of physical values. In July, the committee forecast a 58 cents-a-pound figure.

 

Nonetheless, even 67 cents a pound would represent the weakest figure since the 61.2 cents a pound reported for 2008-09, with the ICAC flagging the prospect of a boost to stocks from a second successive production surplus this sason.

 

“With rising stocks and continuing economic uncertainty, prices will remain under pressure for the near future,” the ICAC said.

 

“At the current stocks-to-use ratio of 0.97, there’s currently enough cotton in the world’s warehouses right now to meet consumption needs for nearly a full year.”

 

‘Successful’ auctions

The USDA’s New Delhi bureau said that its 23.0m-bale forecast for Indian cotton consumption in 2020-21 reflected “successful” results of auctions of state supplies by internet auctions held in July and August by the Cotton Corporation of India.

 

Sales reached 4.3m bales (935,000 tonnes) over the two months, and “trade sources indicate that… a further 1.56m-1.95m bales is expected to be sold by the end of September”.

 

While highlighting that “the outlook for the domestic retail sector remains weak”, the bureau added that the “recent mill buying at CCI e-auction indicates that mills are taking advantage of discounted cotton available in the market as exports for yarn and fabric improve”.

 

PPE vs fashion

For China, the enhanced demand estimate reflected mills’ ability to tap into the booming market for personal protective equipment (PPE), such as medical aprons and masks, created by the Covid-19 pandemic – albeit with these items likely using largely synthetic fibres.

 

“Large companies’ revenue from sales of medical personal protective equipment… increased rapidly” in the first half of 2020, the USDA’s Beijing bureau said.

 

“Due to the sharp increase in export demand for medical PPE, textile exports reached $74.1bn, a year-on-year increase of 27.8%.”

 

By contrast, apparel exports “were greatly impacted by reduced consumer spending, dropping 19.4% year-on-year to $51.1bn”.

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