Week after week, horror and ignominy come thick and fast. To get rid of the nausea that invades every spectator of the world around us, there's nothing better than a trip to "cottonland".
The AFCOT conference in Monaco and the ICA conference in Singapore will not necessarily go down in the annals of cotton history, but they undeniably reflect a profound change in our market that needs to be scrutinized.
What seems most striking is the rise in power of Brazil, which will inevitably dislodge the United States from its cotton stronghold in terms of both production and exports. Projections of the quantities still producible, particularly in Mato Grosso, are staggering. However, this situation highlights two black spots:
- - A logistical infrastructure incapable of keeping up with the flow of exports and imports on both land and sea, not to mention storage capacity.
- - The low level of local consumption, which could act as a safety valve both for cost prices and as a social shock absorber, is too low.
On the other hand, if the southern hemisphere, led by Brazil and Australia, takes the lead in world cotton production, as the figures show, then the current market organization no longer holds:
- - Why a cotton year that runs from August 1 to July 31?
- - Why shouldn't the maturities processed on the ICE change to reflect this new reality and, above all, these cottons should now at least become tenderable... a question that may seem ingenuous, but ...
The other question on the minds of everyone involved in our market is where has textile consumption gone, and can it pick up again before the whole sector collapses? To answer this question, we need to remember the changes that are taking place in consumption patterns:
- - Thrift stores are entering all the major chains, attracting consumers affected by rising prices as well as those concerned about the environment and global warming.
- -Clothes are increasingly being rented out, as the Kiabi brand demonstrates.
- -Knowing that 400 billion dollars of clothing are burned every year without ever having been worn shocks all citizens concerned by global warming and waste.
Against this backdrop, it's hard to focus on declining production in many countries, such as India, China, Pakistan and Greece... Even if American production, which has been revised downwards, were to pick up again, we can legitimately ask ourselves what for. Should we assume that new consumer habits are temporary, and that the frenzy of consumerism is set to pick up again?
Today's spinning mills have no choice but to mix natural and synthetic fibers to balance their books. But how much longer can they hold out in the face of the financial crisis, massive interest rate hikes and limited access to foreign currencies, all in a competitive environment that demands ever greater investment. The noose can quickly tighten on the most indebted when demand and yarn prices fall inexorably.
What does the future hold for the weakest cotton producers in countries where cotton is vital? Salvation will only come through local processing and value-added. Failing that, a switch to other crops and land reform will be necessary.
While this may seem a gloomy assessment, it merely reflects a fundamental change in our society, which, even if it has entered an era of barbarism, must be concerned about its future, with global warming and social protection in mind.
In keeping with our trading DNA, we are maintaining our projections for cotton at between 85 and 90 USC / lb on the ICE, with the dollar and basis to weaken in the weeks ahead.
Finally, rugby and cotton should not escape the southern hemisphere!
Πηγή: Mambo