Cotton sowing: worst year yet?
Cotton sowing: worst year yet?

Cotton sowing: worst year yet?

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It is ironic how quickly well-crafted demand estimates can become dated. In late February, US Department of Agriculture released figures for 2020 global cotton outlook. Back then, the ‘Phase One' trade agreement between China and US – signed on 15-Jan – had already put a pause on the two year-long trade war.

Buoyed by those sentiments, USDA estimated a 2.5 percent rebound in global mill consumption to 121 million bales, highest in a decade. Amid falling global stocks, that proved an obvious positive for cotton prices; one-year futures in NY market that were already on an upward trajectory since Sep-19, rose to 77cts/lb by January end. That was then; in the 90 days since, one-year (Dec-20) contracts have touched 55cts/lb, lowest since 2009.

The million-dollar question then is not when the pandemic may end; but what happens when it is over. While it may be premature to conclude that a freefall in textile manufacturing is a foregone conclusion, it may be fair to assume that the orders lost by producers during the lockdown – whether it lasts for a month or six –  are probably lost for good.

An argument may be made that unlike spending on food, end-consumer purchase of garments and apparels is a ‘postpone-able' decision. However, it may be useful to remember that of Pakistan's $13 billion annual textile exports, $3.5 billion consist of bed, toilet, and kitchen linen; and terry towelling. Its biggest buyer? The hospitality industry in North America and Europe, that according to several commentators is witnessing a worse slowdown than the global recession of 2008-09.

Whether the textile sector will find ways to recover out of this mess will only become clear once the dust settles. But a more pressing decision currently faces the producers upstream: the cotton growers. While problems in wheat harvest dominate the limited space allocated to agri-news in the media, cotton remains the cash crop for over 2.1 million private farms in the country.

Once wheat harvest is completed across the country by April end, growers must face the prospect of kharif season sowing decision. While some degree of demand slowdown appears to be a given across all substitute choices, it is hard to fathom that millions of farmers will choose to let their land remain fallow during the monsoon cropping season.

Thus, traditional cotton growers will make decisions based on which choice may leave them less worse off. On one hand, corn demand is expected to suffer as commercial poultry consumption may take a hit – by what degree remains a matter of debate. The story of sugarcane is no different; as consumer wallets feel the pinch, so will their appetite on sweetener spending.

Nevertheless, with cotton prices touching a multi-year low, it is hard not to expect some substitution. Except, cane and maize are minor crops, whose aggregate area put together adds up to total acreage under cotton. Thus, no amount of substitution could make up for cotton's lost cause, as the secular demand for substitutes may be persistent but also grows more slowly.

And that's assuming that acreage under paddy shall remain unchanged, which has seen highest cultivation – averaging close to 3million hectares – in recent years. While it may be hard to assign a number to how many acres cotton may eventually lose, it appears likely that its production may see its worst year yet.


Πηγή: brecorder.com

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