Since the beginning of 2020, cotton futures prices have declined 30%

Since the beginning of 2020, cotton futures prices have declined 30%

Global cotton consumption in 2019/20 is set to suffer a 12% decline as demand plummets due to the Covid-19 pandemic, with year-end prices seen falling to their lowest levels in more than a decade.

Since the beginning of 2020, cotton futures prices have declined 30%, as retail stores around the globe have shuttered and orders from textile mills have dropped. 

The latest projections from the International Cotton Advisory Council (ICAC) show a 11.8% decline in consumption for 2019/20, a 4% decrease in planted land in 2020/21 and a 4% decrease in production in 2020/21.

"We knew right away it would be bad, the only question was: How bad will it be? We're beginning to find out now," the inter-governmental group says. "With the global economy paralysed and supply chains shattered, current projections show an 11.8% decline in cotton consumption, reducing global trade to 8.26m tonnes in 2019/20."

The body adds: "While there is hope for a vaccine or cure, or that warmer weather in the northern hemisphere will minimise Covid's impact, there can be no real economic recovery unless there is a health recovery first. 

"Whether or not we sink into a worldwide depression – a long recession with unemployment reaching as high as 33% – will be determined by the effectiveness of government policies."

The ongoing uncertainty due to Covid-19 combined with the existing environment of trade tensions is impacting farmer planting decisions. This means that in 2020/21, global area is projected to decrease by 4% to 33m hectares, with India remaining the world leader despite plantings dropping to 12m hectares. Production will decline by a comparable amount to 25m tonnes. 

The ICAC's current price projection for the year-end 2019/20 average of the A Index has been revised to 71.4 cents per pound. The price projection for the year-end 2020/21 average of the A Index is 56.9 cents per pound.

This would be the lowest level since the global financial crisis of 2007-8, when prices fell to 49 cents per pound.

US cotton farmers are among those set to benefit from a $19bn aid package launched to support American farmers and ranchers hurt by the ongoing Covid-19 emergency.