International Containment measures, unprecedented shifts in the labour market and growing unemployment have led to sharp decreases in textiles and clothing sales as demand has dropped.
The current economic environment is an unusual slowdown from a typical recession as the containment measures for Covid-19 have closed business activity in a way not experienced in the modern era. The economic recovery will be able to begin only once the health recovery has begun.
The current recession is unlike any other in some respects as it has been induced by a public health crisis rather than an event in the financial market. A depression is a long recession where unemployment reaches and remains at high level typically around 25 33%. The Great Depression was marked by a decade of high unemployment that had also been induced by ineffective economic policies. The policy responses by countries will be key to stemming a depression, economic recovery and the speed of recovery.
As containment measures remain across countries, global cotton consumption has been revised down to 22.9 million tonnes, an 11.8% decrease from the previous season. With supply chains fractured and consumption demand low, global trade has been revised down to 8.26 million tonnes
The ongoing uncertainty due to Covid-19 combined with the existing environment of trade tensions are impacting farmer planting decisions. The global area under cotton is expected to decline in 2020/21 by 4% to 33 million hectares.
Global production for 2020/21 is currently expected to total 25 million tonnes, a 4% decrease from the current season due to a contraction in area. Global consumption for 2020/21 is currently expected at 23.2 million tonnes. With production exceeding consumption in a contracting global economy, stock levels would be expected to increase putting additional pressure on prices.
Local situation The fourth official cotton estimate indicates a crop of 144 260 bales of fibre which represents a 1% increase compared to the previous month. This increase can be attributed to the increase in yields as well as the recovering of potentially loss in hectares.
In most areas harvesting commenced and although early in the season reports received are positive and farmers are optimistic about the crop performance. Even with the current economic downturn, cotton remains a profitable crop when compared to other summer field crops. Expectations are that cotton exports will further increase whilst a weaker rand/ dollar exchange rate will lead to more competitive prices realised for cotton lint. It will also be a matter of time before cotton plantings will return to levels of previous higher plantings. Many industries are experiencing an uncertain time due to the Covid-19 pandemic, for the cotton industry the “silver lining” will be exports and fetching good prices to support it.
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