As a new harvest season begins, cotton peaked at 0.96 cents per pound on August 23. An increase of 47.7% compared to the very low level encountered at the beginning of September 2020. The natural increase that accompanied the resumption of Asian productions at the end of 2020 is to date accelerated by the resumption of orders but also by the persistent freight crisis and the cotton boycott linked to Uyghurs.
This increase comes as analysts from the United States Department of Agriculture (USDA) expect global consumption of 123.3 million bales for the season from August 2021 to the end of July 2022. By only three times this level would have been reached, according to the archives. China, India and Pakistan would be the main customers of the material over the coming period.
A period during which production should for its part display stable levels, with 118.8 million bales which should see the light of day via the 2021/2022 harvest. Unsurprisingly, India, China and the United States will be the main world suppliers, alone cumulating 60% of the expected quantities.
For the second consecutive season, demand will therefore exceed production. Theoretically reducing world stocks to 87.2 million bales, down 5% over one year. And especially at the lowest level for three years.
A situation which is obviously not without consequences on prices. Particularly at a time when world demand for cotton goods, in particular in clothing, is on the rise again. The market also has to deal with the freight crisis, which multiplies by 3 or 6 times the price of transport between Asia and the West, international confinements having unbalanced the availability of containers between the major world ports.
To this is added another, more political argument to the rise in cotton prices. Many major international brands have decided to boycott cotton from Xinjiang, a province in which Beijing is notably accused of applying forced labor to the Uyghur Muslim minority. A province which concentrates 80% of Chinese cotton production, or some 20% of world production. Behind the standoff over Human Rights, cotton sourcing therefore takes on the aspect of a game of chess.
Because China also holds the world’s largest cotton stock, which continues to strengthen, according to the China Cotton Association. Over the 2020-2021 season, cotton imports are expected to grow by 75% to reach 2.8 million tonnes, says the organization. A situation closely observed by the industry, which remembers that the massive Chinese stocks had contributed to exploding prices ten years ago, after disastrous harvests.
The prices reached today are however still far from the 1.97 dollars reached in March 2011, during this “cotton crisis” of sad memory. Crisis which in particular pushed many brands, already weakened by the subprime crisis, to turn more to artificial materials such as polyester, or to increase their final selling prices. Price increases which seem to date already considered by some brands, at the end of the health crisis.
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