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Trade war, overproduction to impact cotton prices in 2019-20

"September 2019 report of Cotton Inc states the ongoing trade dispute between the US and China is likely to directly impact cotton prices as the tariffs imposed by China on the US cotton has led to a significant fall in the country’s exports. If China further persists in implementing the latest round of announced tariffs on Dec 15, it would increase its total tariffs on US cotton shipments to around 30 per cent."

 

Trade war overproduction to impact cotton prices in 2019September 2019 report of Cotton Inc states the ongoing trade dispute between the US and China is likely to directly impact cotton prices as the tariffs imposed by China on the US cotton has led to a significant fall in the country’s exports. If China further persists in implementing the latest round of announced tariffs on Dec 15, it would increase its total tariffs on US cotton shipments to around 30 per cent.

In addition, the trade war has caused significant uncertainty across cotton supply chains. This is further postponing investments and placement of orders leading to a slower demand. Cotton benchmark prices were stable between August and the first half of September 2019. The spot prices of US Cotton averaged 55.97 cents per pound for the week ended Sept. 12, according to the US Department of Agriculture (USDA).

Stocks to increase to highest levels

Latest USDA report suggest, cotton’s global harvest forecast for 2019-20 has been to lowered to 124.9 millionTrade war overproduction to impact cotton prices in 2019 20 bales and the consumption forecast lowered to 121.7 million bales. This would further result in higher supply against potentially lower demand from slowing economies and trade turmoil, portending softer cotton prices. Cotton stocks are likely to increase by 1.3 billion bales from the last month to 50.0 million bales. If this occurs, it would represent the largest volume of cotton held outside China on record.

Cotton production to decline by 30 per cent

Cotton production in 2019-20 is likely to decline by 30 per cent to 1.4 million bales. The biggest declines will be witnessed in US, Australia, Burkina Faso, Mexico and Turkmenistan. However, production in India is likely to increase. Consumption is likely to decline in China, Bangladesh, Brazil, India, Thailand, Turkey, the US and Vietnam. India will be the largest importer of cotton during the period while imports by Vietnam, Pakistan, Thailand and Turkey are likely to decline. US, Brazil and Australia will be the biggest exporters of cotton while exports from India, Mexico and Burkina Faso will decline.

 
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