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Global cotton consumption hit by slowing economic growth

Dec 02, 2019 (MarketLine via COMTEX) --

Slowing global economic growth is dragging down global cotton consumption, new data shows, with Southeast Asia manufacturing activities expected to be hit.

Growth in cotton consumption is projected to continue in the coming season, according to an update by the International Cotton Advisory Committee (ICAC), but major economic indicators and continuing trade conflicts are dragging down the industry's multi-year winning streak.

Figures show global consumption is continuing the recovery it began in the 2012/13 season, but is only expected to increase 0.3% in 2019/20, reaching 26.2m tonnes, slowing to the lowest levels in decades as global trade disputes remain unresolved, leading to uncertainty for manufacturing and investment activity.

For the cotton sector, which has been buoyed in recent years by the thriving textile industries of East Asia and Southeast Asia, the recently revised IMF forecasts of a global synchronised slowdown are expected to stall growth for the region's manufacturing activities and demand for consumer goods.

In a separate update, the ICAC noted that global stocks at the start of the 2018/19 season were 1% higher than the previous season at an estimated 18.7m tonnes. At 84 cents per pound, the international reference price of cotton was lower than the previous season's ending average of 88 cents per pound.

After a 99.5% per pound price at the start of the season, prices fell throughout the year. Global area under cotton decreased by 1% to 32.6m hectares. Global yield decreased slightly by 2% to 790 kg/ha but remained above the ten-year average of 776 kg/ha.

As a result, global production decreased by 3% to 25.7m tonnes.

"New uncertainties have emerged in addition to the usual risks facing agriculture," the ICAC noted. "Following several years of relatively calm market conditions, world agricultural markets today face mounting risks, including policy uncertainty from trade tensions. Open, transparent and predictable trade is important for the cotton market and its role as an important commodity in the global economy."
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