The markets are still preoccupied with the fear of the spreading pandemic which is worsening globally day by day. Central banks in the USA and Europe are putting in place economic measures to try and stem the fallout in stock and commodity markets. Despite these massive interventions we are seeing global markets collapse.
The cotton market has therefore succumbed to the same fate and for now will continue to follow fortunes of outside markets.
In the US sales continue at a good pace however shipments are slowing and this is causing concerns. The virus is affecting the logistics business with the availability of containers and equipment becoming scarce due to slow trade flows.
There is no doubt that this market has created demand destruction but it is difficult to quantify exactly how much. We are already seeing how many retailers are struggling to cope with lower footfall and demand for their goods, which will no doubt have a knock on effect down the line for cotton demand.
Low prices will also have an impact on intended production schedules, as farmers weigh up their planting options. With cotton at such low levels, cotton farmers particularly in the US, will look at other planting options other than cotton. That said there is no doubt that the greatest impact will be on the consumption rather than the production side.
The crude oil price war initiated between Russia and Saudi Arabia has seen the oil price plummet to as low as $26 per barrel. This in itself will create additional loss in demand for cotton as manmade fibers become cheaper.
Time will tell whether the government interventions in the markets will add some much needed calm to proceedings, China are soon to announce another massive stimulus as their yearly growth is set to be the lowest for over 50 years. These are difficult times financially, but the health and well-being of everyone remains paramount until a solution can be found to the growing spread of the virus.
Πηγή: Mambo