On March 1, the global production demand forecast released by the International Cotton Advisory Committee (ICAC) believes that the current cotton fundamentals remain good, but shipping problems continue to affect the cotton market, and the current Ukrainian crisis will also have an important impact on the cotton industry.
In 2021/22, global cotton consumption will fully recover and is expected to reach 25.67 million tons, with output expected to be 26.11 million tons. However, cotton supply and demand is not a problem this year. The problem lies in the transportation of cotton from the place of production to the place of consumption. According to last month’s report, U.S. cotton export shipments fell sharply from the same period in previous years as export shipments struggled to keep up. In December 2021, although U.S. cotton exports were higher than in the previous three months, they were still far below the level of the same period in 2020.
Textile mills in various countries need to make purchasing decisions based on the available cotton sources and shipping time. Rising sea freight, port congestion, and insufficient containers are all important factors affecting cotton shipments. At the same time, various countries also have control measures to deal with the epidemic, all of which have an impact on cotton trade. Once the shipping problem is resolved and cotton can enter and exit freely, the ports of many large importing countries will be filled with cotton, which will put potential pressure on cotton prices. If prices fall while farmers are deciding their intentions, that could affect acreage, depending on when that happens.
The intended cotton planting area released by the National Cotton Council (NCC) shows that the intended cotton planting area in the United States in 2022 is 4.86 million hectares, a year-on-year increase of 7.3%. Texas is currently experiencing a severe drought, and the actual sown area may decline unless planting There is sufficient rainfall during the growing season. But that’s always been the case in Texas. In addition, Australia’s cotton planting area in 2022/23 is expected to increase slightly to 623,000 hectares.
The current situation in Eastern Europe is also an important factor affecting cotton prices. Although Russia and Ukraine are not major countries in the cotton industry, they are important producers of coal, natural gas, and oil. International oil and natural gas prices have risen sharply recently, which is directly related to the Russia-Ukraine conflict. Natural gas is an important element in nitrogen fertilizer production. Fertilizer prices have risen sharply in recent years, and the Russia-Ukraine conflict may cause fertilizer prices to rise further. While nitrogen fertilizer has the greatest impact on corn production, cotton and other soft commodities will also be affected. Higher oil prices may also increase the price of chemical fiber and other man-made fiber products, but the direct impact on cotton is unclear.
The world is complex and many things affect each other. ICAC will study and determine how these events affect the cotton industry. ICAC expects the Kotruk A index range for 2021/22 to be 101-120 cents/lb, with an average of 109 cents/lb.
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