Demand for cotton around the world is spiraling downward during the coronavirus pandemic, causing the USDA to lower its forecast for global consumption by 6.4% - a whopping 7.6 million bales.
World cotton usage is now expected to drop to just 110.6 million bales for the 2019-20 marketing year that runs through July. That’s down from last month’s forecast of 118.2 million bales.
U.S. farmers are heavily dependent on global cotton demand due to the demise of the domestic textile industry. An estimated 83% of last year's U.S. crop will be exported.
“The unprecedented reduction (in global usage) is driven by the rapidly developing impacts of COVID-19 on countries around the world,” USDA's Foreign Agricultural Service said in a report released Thursday. “It represents a loss of about 3-and-a-half weeks of global spinning or about 16 percent of the expected spinning March through July based on the March USDA forecasts.”
Mills in China, Vietnam, Pakistan and elsewhere are being shuttered, but another factor is that consumers around the world are buying less clothing and textile products as they stay home and away from brick and mortar retailers.
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USDA on Thursday lowered its forecast for U.S. cotton exports to 15 million bales, a 9% drop from the department’s March forecast of 16.5 million bales.
“Cotton prices have declined significantly in recent weeks, with the nearby ICE futures contract falling below 50 cents for the first time in over a decade,” USDA said. “This has pressured spinners as higher-priced cotton purchased earlier in the season arrives when current prices are now 10 to 20 cents lower. Prices are expected to remain pressured with global consumption forecast at a 6-year low, world ending stocks at their highest level in 5 years, and stocks outside of China 25% above the previous record.”