Although there are still many problems plaguing the cotton market in 2023, in the context of China and the global economic recovery, the cotton market seems to have no doubt about consumption growth. The recent U.S. Agricultural Outlook Forum made quite optimistic predictions about this.
According to the forum’s forecast, global cotton consumption will increase to 115.5 million bales in 2023/24, an increase of 4.8 million bales year-on-year, an increase of 4.4%, which is much higher than the historical long-term average growth rate of 1.7% since 1960/61. The reason is The economic environment improves, the impact of the epidemic continues to weaken, and international cotton prices fall sharply in 2022/23. The forum believes that with the destocking of the industrial chain, global textile production will begin to rebound from lows at the end of 2022, and inventories will also tend to historical long-term normal levels, thus supporting the growth of cotton consumption.
Despite this, the forum believes that there are still great uncertainties in the outlook for cotton consumption. One is that consumer spending continues to shift from goods to services, and the other is that the world continues to tighten monetary policy to combat inflation. There is also the conflict in Eastern Europe that threatens global economic growth at any time. This is particularly important in Europe because the EU and the UK are jointly the largest consumers of cotton fiber consumer goods in the world.
Coincidentally, the American Apparel and Footwear Association also believed at the Outlook Forum that from the perspective of terminal retail, the growth of cotton consumption is also questionable. One of the problems is that consumer spending has begun to shift from products to services, and the structure of clothing consumption has also changed. Change is happening.
Data from the U.S. Bureau of Statistics shows that after July 2022, the growth rate of online retail sales in the United States has declined significantly. The growth in January 2023 was less than 6%, which was far lower than the 16% in July 2022. Moreover, since May 2022, the growth rate of clothing retail sales in physical stores in the United States has been very sluggish. In contrast, spending on services such as restaurants and bars has maintained growth momentum.
U.S. online retail growth
U.S. physical store retail growth
U.S. food and beverage spending
From the perspective of U.S. clothing imports, the import volume of cotton clothing will remain stable from 2021 to 2022, while the import volume of chemical fiber clothing will continue to rise, nearly doubling in 2022 compared with 2010. From a price point of view, with the US CPI remaining high, US clothing products have seen a new inflation since 2010 in the past year. Foreign surveys show that the current frequency of jeans updates by European and American consumers has increased from only 3-5 times in the past to more than ten times.
The above situation forces the market to remain cautiously optimistic about cotton consumption in the later period. The rise in cotton prices is mainly driven by consumption. After the clothing inflation in 2010, although the global economy and population have maintained growth, global cotton consumption has always stagnated. What will this new round of clothing inflation bring to cotton consumption and prices? The impact is worth pondering.
As for where cotton prices will go in the future, the USDA Outlook Forum has already given the answer – although the current cotton prices have fallen sharply from last year’s high point, and global consumption is expected to rebound significantly, the 2023/24 Kotruk The A-index average is expected to continue to decline slightly on a current-year basis to 97 cents/lb. In February 2022, the American Agricultural Outlook Forum predicted a sharp decline in the Kotruk A index in 2022/23. At that time, it was estimated that few people could accept it, but it turned out that the prediction was quite accurate.
USDA Agricultural Outlook Forum February 2022 Forecast
USDA Agricultural Outlook Forum February 2023 Forecast
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