Tighter supplies add uncertainty to hopes for global cotton recovery - Just Style
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Tighter supplies add uncertainty to hopes for global cotton recovery

By Giacomo Lee 06 Apr 2021

An expected increase in global cotton mill use and the distribution of vaccines offer some hope for recovery in the cotton sector but there are multiple issues that could derail progress, including tightening supplies and the continuing escalation of trade tensions between some of the world’s top producers and consumers.

On the positive side, mill use is expected to increase by 8% in the 2020/21 season and vaccines have slowly been making their way around the globe, the International Cotton Advisory Committee (ICAC) says in its latest update.

However, vaccine deployment varies widely from one region to the next, with many countries having provided no vaccinations at all. In addition, consumer spending on goods has improved more than it has for services to date, so once people can return to travelling and socialising, a potential shift in spending could reduce demand for durable goods.

Furthermore, while the global consumption estimate has increased from the previous month, the global production estimate has decreased, so lower stock levels could provide future support for prices, which set a season-high at the end of February.

In addition, uncertainty abounds regarding the relationships between major buyers and sellers. There has been no progress made since the Phase One trade agreement between the US and China went into effect last year with tensions also between China and Australia, ICAC notes.

This month, the Secretariat’s current price projection for the year-end 2020/21 average of the A Index is 78.5 cents per pound.