Though the overall severity of the COVID-19 pandemic impact on the world economy remains unknown, the immediate and substantial shock to global cotton mill use has undoubtedly been historic. US department of agriculture (USDA) estimates world cotton mill use to plunge nearly 15 per cent year-on-year in marketing year 2019 (MY 19, i.e. August 2019-July 2020).
It is known that cotton mill use generally follows global economic activity. When the world economy weakens— as during the COVID-19 pandemic—consumers often defer purchases of items such as clothing, and the associated industries adjust their operations accordingly. “For the textile and apparel industry, these adjustments have included temporary closures or substantial reductions in manufacturing operations as postponement or cancellation of orders have had ripple effects throughout the entire supply chain, from raw fibre procurement to retail sales,” the Economic Research Service of the USDA said in its ‘Cotton and Wool Outlook’ report for June 2020.
While the COVID-19 effect unfolds, the developing global economic slowdown has significantly reduced recent USDA monthly forecasts for world cotton demand for MY19. Based on USDA’s June 2020 forecast, MY 2019 global cotton mill use is estimated at a 16-year low. “Although this low is noteworthy, the projected annual reduction is of historic proportion, with world cotton mill use estimated to plunge nearly 15 per cent year-over-year. In fact, the projected MY 2019 decrease is unmatched during the past century,” the report said.
Global cotton mill use has declined more than 5 per cent year-over-year in only 10 other years since MY 1920, with most of those reductions associated with global recessions, including the Great Depression. More recently, uncertainty surrounding the global financial crisis significantly limited world cotton demand in MY 2008, while a dramatic run-up in MY 2010 cotton prices to levels not experienced since the US Civil War hampered mill use in MY 2011.
