According to the Associated Press, almost all major cotton supplier countries in the world have cut production this year due to extreme weather, which has pushed up cotton prices by as much as 30%.
Looking to the second half of the year, cotton production is still expected to be difficult to recover, and market analysts predict that cotton prices may continue to surge sharply in the coming months.
Major cotton supplier countries around the world have experienced production cuts
Since the beginning of this year, all major cotton supplier countries in the world have been affected by extreme weather, and cotton production has decreased.
In India, the world’s largest cotton producer, continuous heavy rains and pest and disease disasters this summer have seriously affected India’s cotton production, forcing the country to import cotton from overseas this year.
In the United States, the world’s largest cotton exporter, increasingly severe drought weather has reduced cotton production by 28% to the lowest level in more than 10 years.
Brazil, the second largest exporter of cotton, has also experienced high temperature and drought weather, which has reduced the country’s output by nearly 30%.
Due to the impact of extreme weather in various countries, global cotton prices have soared by as much as 30%. Earlier this year, cotton prices soared to their highest levels since 2011, squeezing profit margins for global apparel suppliers and pushing up the cost of clothing and other cotton products.
Earlier last week, Jane Elfers, CEO of Children’s Place, the largest children’s clothing retail brand in North America, bluntly stated on an investor call that soaring cotton prices were “a very, very big problem that we are facing.” question,” the company hopes to see cotton prices fall back in the second half of this year.
However, judging from the situation in the United States and Brazil, Elvers’s hopes may be dashed.
Cotton prices may continue to surge in the second half of the year
The United States and Brazil together account for half of global cotton exports. Judging from the forecasts of these two countries alone, cotton supply conditions may not improve in the second half of the year.
According to Brazilian agricultural organization Abrapa, Brazil’s dry weather has caused about 200,000 tons of cotton to die, which is expected to drag down the country’s output in the next harvest season. Bom Futuro Group, one of Brazil’s largest cotton producers, expects output in this quarter to drop 27% from the previous quarter. The group’s cotton planting area accounts for about 10% of Brazil’s total.
At the same time, U.S. cotton production this quarter is expected to drop 28% to the lowest level in the past 12 years, and U.S. cotton inventories are also expected to fall close to historical lows.
The U.S. government had previously expected that global demand would fall due to a decline in clothing purchases and an economic slowdown, especially in Europe and Asia. However, Andy Ryan, senior relationship manager at Hedgepoint Global Markets, a market analysis agency, believes that all signs indicate that the downward pressure on the cotton supply side is far greater than the demand side. As cotton production declines, cotton prices will rise “significantly” in the coming months.
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