Domestic cotton markets ended the week on a bullish note. Gains across major Agri commodities and absence of any bearish news in domestic or global centers kept the tone positive. The supply conditions are tightening as demand returns to the Pre Covid level. Additional support in consumption is seen from rise in usage of cotton products in Hospitals and health clinics for fighting with the corona pandemic. The supply and demand fundamentals are still positive for cotton.
World cotton production is estimated at 113.0 million bales in 2020/21, in latest USDA report. This will be the smallest production number in 4 years. Fall in the harvested area in the largest producing countries account for the decline. Meanwhile, world cotton stocks (93.5 million bales) and the stocks-to-use ratio (79 percent) are both forecast lower in 2020/21, thereby enhancing this season’s cotton price expectations.
United States, India, China and Brazil are amongst leading cotton exporters in the world. Production in India is forecast 5 lakh bales lower at 29.0 million bales in 2020/21, versus 2019-2020 as lower area and yield is expected to reduce the crop. India’s area is lowered by 1 percent to 13.35 million hectares, while the yield is projected at 473 kg per hectare. Global Cotton Consumption is seen improving in 2020/21 and the US Department of Agriculture projects world cotton mill use in 2020/21 at 117.8 million bales, 14.5 percent (14.9 million bales) above last season, which was impacted adversely by the COVID-19 pandemic.
For India, cotton consumption is projected at 24.3 million bales in 2020/21, reflecting an increase of 4.3 million bales (21.5 percent) from 2019/20. As a result of significant increase in world cotton consumption expectations for this season, global cotton trade is also projected to expand considerably in 2020/21, as importing needs of the respective nations are increasing as well.
Likewise, world’s cotton exports in 2020/21 are projected at 45.4 million bales, which will be 4 million bales higher than 2019/20 or 10 percent above last year’s. This will be also the highest in 8 years. The US Department of Agriculture projects India’s exports to increase significantly by nearly 2.5 million bales in 2020/21, as record supplies can result in pushing the overseas shipments to 5.7 million bales. In all, 2020/21 world stocks are projected to decline nearly 5 million bales from the previous year, based on these global cotton supply and demand estimates. Global cotton stocks are forecast at approximately 93.5 million bales, which shall be lower by 5 percent from the 2019/20 stock level. The reduction in the global stocks will be supportive of cotton prices in the longer run, especially in an expanding global economy with improving world cotton mill usage.
