Impact Of Global Extreme Climate On Cotton Production And Supply

Increasingly extreme weather is increasing the risk of crop loss worldwide.

Among them, the impact on cotton is the most severe. This year, the output of the three major cotton suppliers in the world has been reduced due to extreme weather.

The United States is the world's largest cotton exporter, with Texas, its main cotton producing region, likely to reduce its cotton production by 28% in the third quarter to its lowest level in more than 10 years due to the rare drought weather, and the US cotton inventory is expected to drop to a near historical low, according to a report by Bloomberg.

At the same time, the country's second largest cotton export, Brazil, suffered from high temperatures. According to the Brazilian Agricultural Organization abrapa, Brazil's dry weather has caused about 200000 tons of cotton to die, and the country's next harvest season is expected to drop to 2.6 million tons or less.

Brazilian cotton giant BOM Futuro Group expects cotton production to fall 27% month on month in the third quarter of this year. The group's cotton acreage accounts for about 10% of Brazil's total. Extreme weather led to a 30% surge in cotton prices, which may continue to rise in the second half of the year.

In addition, India, the world's largest cotton producer, suffered from heavy rain and disease and insect disasters this summer, which led to a sharp reduction in India's cotton production and had to import cotton from overseas.

Global extreme weather is causing market concern. Since July 15, the price of cotton futures on the Intercontinental Exchange (ice) has continued to soar, with a cumulative increase of 39.5%.

Earlier in 2022, cotton prices surged to their highest level since 2011, squeezing margins for global apparel suppliers and pushing up costs for clothing and other cotton products.

Last week, Jane Elfers, chief executive of children's place, North America's largest retail brand for children's wear, warned that soaring cotton prices were a serious problem for the company and that the company hoped to see a fall in cotton prices in the second half of this year.

However, the decline of the largest cotton producing countries makes the future market not optimistic. The United States and Brazil alone account for 50% of global cotton exports.

Hedgepoint global markets, a market analyst, believes that all indications indicate that the downward pressure on the cotton supply side is far greater than that on the demand side. With the decline in cotton production, cotton prices will continue to "rise substantially" in the coming months.