Markets

World cotton stocks on high

Andrew Whitelaw, Thomas Elder Markets, October 15, 2020

DURING last year the Australian cotton crop dropped to 625,000 bales as drought bit. We didn’t add much volume to the global market, but this year we are set to rebound with 2.1 million bales, a volume still below the decade average.

Whilst we weren’t producing, the rest of the world didn’t stop. The world cotton market is now well supplied, and whilst the stocks to use ration has fallen this year, it remains very high.

At present, the stocks to use ratio is at 89 per cent, which means that if the world were to produce no cotton next year, then there would be enough in stores to meet nearly a year’s demand.

The leading importers of Australian cotton have experienced increases in their stocks, with a very narrow spread between consumption and stocks.

The big question in the coming months (and years) will be whether a downturn in the economy will result in reduced demand for clothing.

This article was originally published on the Thomas Elder Markets website. https://www.thomaseldermarkets.com.au/

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