Cotton consumption is projected to rise 3.5 percent to nearly 122 million bales in 2021-22, up from the pre-pandemic pace of 2018-19.

Chart 1. World cotton consumption is forecast to rise 3pc in 2021/22. Source: USDA

The USDA’s first cotton forecast for 2021/22 (Chart 1)  shows that, while recovery from the COVID-19 pandemic is still underway, use will increase this year, but will remain below the record level set in 2017/18.

World trade is expected to contract slightly in 2021-22 from 2020-21, which was the highest in eight years.

Australia’s exports are expected to more than double in 2021-22, to 697,000 tonnes, on the back of significantly higher demand, with better prospects than the severe drought of 2020-21.

Shipments from the United States and Brazil (chart 2) are expected to decline as a result of lower exportable supplies and lower carry-in.

Chart 2. World cotton exports are forecast to decline 2pc in 2021/22. Source: USDA

India’s exports are up as higher world prices allow for the reduction of government-controlled stocks.

Higher global demand compared to the previous year would fuel the second-highest expected global imports in nine years. For the second year in a row, China is expected to be the world’s largest importer, though imports are expected to be lower than the previous year’s eight-year peak.

Following the State Reserve’s planned return to replenishing stocks with foreign and domestic supplies, this is the latest growth. Imports into Pakistan are down marginally from last year’s record, but still substantial due to the highest estimated consumption level in three years and lower carry-in.

Global stocks have expanded again in the past three years to between 95pc and 75pc of total use, compared with the three years from 2016-17 when stocks represented less than 70pc of use.

Cotton price firms 40pc

The cotton A-index in April 2021 was more than 40% higher than the same month last year, which had the lowest monthly average in 11 years.

Due to dry weather in Texas and higher commodity prices such as corn, wheat, and soybeans, the A-index and U.S. spot price (chart 3) have risen marginally since April’s WASDE.

Chart 3. Cotton price index (blue line) and US spot price (red squares, US cents per pound) rose about 40 per cent from year-ago lows. Source USDA.

After April 2020, prices have risen due to increased global demand and decreased global supply.

Source: USDA