Home Business The World’s Cotton Supply Keeps Shrinking, Hit by Drought, Heat

The World’s Cotton Supply Keeps Shrinking, Hit by Drought, Heat

10 min read
Comments Off on The World’s Cotton Supply Keeps Shrinking, Hit by Drought, Heat


(Bloomberg) — Extreme weather is wreaking havoc upon virtually all of the world’s largest cotton suppliers.

Article content

(Bloomberg) — Extreme weather is wreaking havoc upon virtually all of the world’s largest cotton suppliers.  

Advertisement 2

Article content

In India, the top-producing country, heavy rains and pests have cut into cotton crops so much that the nation is importing supplies. A heat wave in China is raising concerns about the upcoming harvest there. In the US, the largest exporter of the commodity, a worsening drought is ravaging farms and is set to drag production to the lowest level in more than a decade. And now Brazil, the second-largest exporter, is battling extreme heat and drought that have already cut yields by nearly 30%. 

This confluence of extreme weather events brought on by climate change has sent cotton prices soaring by as much as 30%. Earlier this year, they touched the highest level since 2011, squeezing the margins of clothing suppliers around the world and threatening to raise the costs of everything from t-shirts, to diapers, to paper and cardboard. In a call with investors earlier this week, Children’s Place CEO Jane Elfers described the surge in cotton prices as “a huge, huge problem for us” and said the company was hoping to see some relief in the second half of the year. 

Advertisement 3

Article content

The outlook for Brazil is anything but helpful. The drought there has already dried up an estimated 200,000 metric tons of supply, according to Abrapa, a group representing growers. With the nation’s 2021-2022 harvest close to complete, production is now seen at 2.6 million tons — or less.

Bom Futuro group, one of Brazil’s largest cotton producers accounting for about 10% of the nation’s planted area, has seen yields fall 27% compared with the previous season. Julio Cezar Busato, a grower in Sao Desiderio, Bahia state, has suffered from a similar decline. Dryness is reducing the number of cotton bolls, making them lighter across all of the country’s main growing regions, he said.  

Read More: Meet Six People Fighting Water Scarcity Across the Globe 

Advertisement 4

Article content

Meanwhile, US output is set to plunge 28% in the season that began this month. The US expects production to hit the lowest level since the 2009-2010 season, sending stockpiles to near-historic lows, because of a drought that has become so extreme that the US government is rationing water from the Colorado River. Together, the US and Brazil account for half of the world’s cotton exports. 

Sign up here for Elements, Bloomberg’s daily energy and commodities newsletter.

The decline in global supplies has become so steep that it’s overshadowing demand headwinds. The US government and analysts have been projecting a drop in demand due to a slide in clothing purchases and slowing economies, especially in Europe and Asia. And yet all signs point to “much higher” cotton prices in the coming months with crops shrinking, said Andy Ryan, senior relationship manager for Hedgepoint Global Markets in Nashville.

Advertisement 5

Article content

‘A Mountain of Money’

Busato, who also serves as the head of Abrapa, sold 75% of what he expected to harvest in advance and ended up largely missing out on the big surge in prices. Because of the weather, he only produced enough to meet his already-existing contractual obligations. “I could have made a mountain of money,” he said. 

The weather has created a secondary headache for the cotton buyers of the world. Untimely rains in regions including Australia, Pakistan and even Brazil have also diminished the quality of the stock, said Peter Egli, director for Plexus Cotton Ltd. 

So as not to be blindsided for another season, Brazilian farmers are set to increase their cotton-growing areas by 100,000 hectares to 1.7 million hectares for the 2022-2023 season, with plantings beginning in January. Now that most of the current crop there has been sold, farmers are looking to start hedging the 2023 harvest more aggressively. “We don’t want to lose Asian markets that we gained recently,” Busato said. 



Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.


Source link

Load More Related Articles
Load More By 
Load More In Business
Comments are closed.

Check Also

When is the Right Time of Year to Transport Your Vehicle?

Transporting a vehicle can be a stressful experience, especially if you are unsure about t…