The US slashed again its forecast for world cotton consumption this season, citing the knock-on effects of weakened economic prospects, although the impact on prices was limited by production downgrades too.
The US Department of Agriculture downgraded by 3.25m bales to 111.7m bales its forecast for world cotton demand in 2022-23.
“Declining supplies, lower profit margins for spinning mills, falling yarn orders from fabric and apparel companies, and higher inflation levels are all pressuring consumption,” the USDA said.
Demand is now expected to fall by 5.4m bales year on year, the USDA said, adding that “significant challenges for the three largest consumers – China, India, and Pakistan – are expected to lower global consumption significantly below the previous two years,” although to a level which remains above Covid lows.
In China, the top cotton consumer, “ongoing Covid-19 lockdowns, slowing domestic purchases of apparel, declining yarn prices relative to cotton lint, and significantly lower cotton product exports have drastically slowed… consumption over the past two years”.
The USDA has now cut by 8.2m bales since July its forecast for world cotton demand in 2022-23, reflecting gloomier economic outlooks.
‘Damage assessments are ongoing’
However, while the immediate market impact was to send New York cotton futures into negative territory, they recovered to stand at 81.27 cents a pound in late deals, up by 0.5% on the day.
The USDA also cut its estimates for cotton output in some major producers, including Pakistan, where the output forecast was cut by 800,000 bales to 3.70m bales, the lowest since 1983-84, following its severe floods in August.
“Damage assessments are ongoing, and production is revised down due to lower-than-anticipated arrivals” of cotton at Pakistan’s gins, with volumes running 40% below year-ago figures.
“Australian production is estimated 500,000 bales lower,” also reflecting flood damage, “and Mali’s crop is reduced 120,000 bales,” the USDA added.
The output changes limited to 2.3m bales the upgrade to the USDA’s forecast for world cotton stocks at the close of this season, to 89.6m bales.