The world’s cotton supply is shrinking hit by drought and heat

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

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 percent.

This confluence of extreme weather events brought on by climate change has sent cotton prices soaring by as much as 30 percent.

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.

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 percent of the nation’s planted area, has seen yields fall 27 percent 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.

Meanwhile, US output is set to plunge 28 percent 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.

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.

Busato, who also serves as the head of Abrapa, sold 75 percent 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.

Source: Nam News Network

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