Source: cottongower.com

By Jim Steadman | February 12, 2021

In presenting the National Cotton Council’s annual economic outlook for cotton, Dr. Jody Campiche highlighted a few key factors that will shape the U.S. cotton industry during 2021.

“This past year was characterized by significant uncertainty and volatility in both the global economy and the world cotton market,” noted Campiche, NCC Vice President, Economics & Policy Analysis. “The COVID-19 pandemic caused unprecedented disruptions in the supply chains and markets for the U.S. and world cotton and textile industries during the first half of 2020, and devastated textile supply chains as retail outlets shuttered their doors for months.

“As the collapse in cotton demand persisted throughout 2020, the negative impacts were felt across the U.S. cotton industry.” There is good news early in 2021, said Campiche. While the pandemic is still creating disruptions in various parts of the world, the overall economy is recovering at a much faster pace than originally expected. A partial recovery U.S. mill use of 2.8 million bales is projected during the 2021 crop year. And world trade is estimated to be higher in the 2020 marketing year as consumption recovers from the COVID-19 pandemic.

“Based on sales and shipments for the year-to-date, U.S. exports are projected to reach 15.8 million bales in the 2020 marketing year,” she said. Campiche. “As a result of large carryover sales from the 2019 crop year and increased purchases from China, U.S. export commitments and shipments have been very strong for the 2020 crop year, with current commitments at the highest level at this point in the marketing year since the 2010 crop year.”

U.S. exports are projected to drop slightly to 15.4 million bales in the 2021 marketing year due to large stocks in other major exporting countries and a partial recovery in Australia’s production. Combined with U.S. mill use, total offtake exceeds expected production, and ending stocks are projected to fall to 2.6 million bales – one of the lowest levels in the last 20 years.

Campiche said world production is estimated to increase in 2021 to 115.6 million due to a slight increase in acreage. World mill use is projected to increase to 120.9 million bales in 2021. Ending stocks are projected to decline in the 2021 marketing year to 90.4 million bales, resulting in a stocks-to-use ratio of 74.8%.

Although global stocks remain high, she pointed out that a tighter U.S. balance sheet, low supply chain inventories, increased purchases from China, speculative money flow, a weaker U.S. dollar, higher grain and oilseed prices, and post-COVID demand expectations are contributing to bullish sentiment for cotton prices.

However, additional restrictions related to COVID-19, large stocks outside of China, and low man-made fiber prices could put downward pressure on cotton prices in 2021. Also, current economic projections for the U.S. and global economies should be viewed with caution given the lack of clarity regarding the potential impacts of the ongoing pandemic. Vaccine distribution has created optimism for world economic conditions. Yet, some uncertainty is still present due to increased infections and new virus strains and renewed restrictions in some parts of the world. (Source: cottongower.com)