The September global production and demand forecast released by the International Cotton Advisory Committee (ICAC) believes that the bullish factors included in the current cotton bull market include increased global cotton demand, imbalance between cotton supply and demand, and tighter ending stocks.
ICAC believes that global cotton demand is showing signs of recovery and growth. Global exports in 2021/22 have been raised to 10.2 million tons, and consumption has been raised to 25.8 million tons. Driven by the growth in demand, cotton prices have also continued to rise. The Kotruk A index has remained high at the beginning of the 2021/22 season, with the annual average price so far at 101.34 cents/pound. The average cotton price in China so far this year is 126 cents/pound.
With the reopening of global economic, social and commercial activities, consumer demand for textiles and clothing has regained a new lease of life. Although new coronavirus mutant strains continue to emerge and coverage continues to expand, and the vaccination situation in various countries is very uneven, making it difficult to completely eradicate the epidemic, cotton consumption shows no signs of decreasing.
In 2021/22, global cotton production will be 24.9 million tons, and the cotton planting area will be 32.8 million hectares. The main reason is that the US cotton production is reduced. The expected decrease in global cotton production (India, China, the United States, etc. have all been reduced month-on-month) will also prompt cotton prices to rise further.
Due to the expected imbalance between cotton supply and demand, rising market demand driven by consumption recovery in developed countries, and repeated epidemics in major cotton consuming countries and textile supplier countries such as Bangladesh and Vietnam, the supply side of cotton has also been affected. Something went wrong, so the cotton market presented a perfect situation.
Not only that, the WTO predicts that global merchandise trade volume will increase by 8% year-on-year in 2021, showing strong recovery momentum and accelerated trade growth.
With declining production and increasing demand, global ending stocks in 2021/22 are expected to decline for the second consecutive year to 19.7 million tons, a year-on-year decrease of 5%. China’s ending stocks are expected to be 9.3 million tons, a year-on-year increase of 1.5%. Ending stocks outside China are expected to be 10.3 million tons, a year-on-year decrease of 9%.
ICAC predicts that the Kotruk A index will run between 76 and 126 cents/pound in 2021/22, with the median price being 98.20 cents/pound.
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