Global Cotton Supply and Demand Pattern Outlook and Hotspot Analysis
！！Mr. James Johnson, USDA,
2019-06-14 11:20:28
First of all, Mr. Johnson analyzed U.S. Balance Sheet. He pointed out that cotton production in the US increased in recent year. Although the planting area descended, the harvest area was on the rise. Especially in Texas, which had very nice weather this year.
Secondly, Mr. Johnson indicated that 2019/20 would be a challenging year. For supply, global production is expected to rise by 5.9%, dominated by the increase in the US (19.6%) and India (11.8%). China¨s output is likely to be stable, while Brazil¨s production may slip by 6.3%, with sharp production reduction in Australia due to the weather. In terms of demand, global consumption is estimated to ascend by 2.9%, which is basically close to the long-term average, with Vietnam and Bangladesh showing the most obvious growth of 8.6% and 5.0% respectively. India and China manifest similar demand growth rate at 2.8% and 2.5% respectively, slightly below the global average. In the case of inventory, global ending inventory may decline by around 1.5%, except for the decrease of 8.6% in China, inventories in other regions are anticipated to slightly tick up to historical high. USDA expects State Reserves sales will bring SR stocks below 2 million tons this season and State Reserve will buy more cotton, foreign and domestic in 2019/20. Most of remaining old cotton will be sold in 2020, leading to State Reserve at about 2.5 million tons at end of 2019/20. For export, global exports may increase by around 8.7%, while most of the growth may come from the US (15.3%) and Brazil (43.9%). Trade friction between China and the US leads to fewer U.S. cotton exports to China, while Brazil is benefited.
In addition, Mr. Johnson analyzed hotspot of current cotton market. Since the beginning of this year, the exports from the US to China has slipped and cotton market is not promising due to the Sino-US trade friction. Regarding the current trade relationship between the US and Mexico, Mr. Johnson noted that Mexico was one of the top five markets for cotton in the US, with most returning to the US market as apparel. Other suppliers would benefit if duties put in place, Vietnam, Bangladesh, maybe even China.
Finally, Mr. Johnson expressed his concern about future global demand for cotton. Cotton demand was driven by global economic growth, while the US and EU were the biggest end-use market. Falling yields on ten-year and three-month Treasury bills raised fears of a possible economic recession in the US. Brexit was still uncertain and a hard UK exit could slow economic growth in Europe Besides, China and India are also very large end-use markets. But both countries have seen slower economic growth recently, whether growth recover or slows more would impact demand.
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