Cotton mill use generally follows global economic activity. When the world economy weakens, as during the COVID-19 pandemic, consumers often defer purchases of items such as clothing, and associated industries adjust their operations accordingly.
For the textile and apparel industries, these adjustments have included temporary closures or substantial reductions in manufacturing operations, as the postponement and cancellation of orders have had ripple effects throughout the entire supply chain, from raw fiber procurements to retail sales.
While the effects of COVID-19 unfold, the developing global economic slowdown has significantly reduced recent USDA monthly forecasts for world cotton demand for marketing year (MY) 2019 (August 2019 to July 2020).
Based on USDA’s June 2020 forecast, MY 2019 global cotton mill use is estimated at a 16-year low. Although this low is noteworthy, the projected annual reduction is of historic proportion, with world cotton mill use estimated to plunge nearly 15% year-over-year. In fact, the projected MY 2019 decrease is unmatched during the past century.
Global cotton mill use has declined by more than 5% year-over-year in only 10 other years since MY 1920, with most of those reductions associated with global recessions, including the Great Depression.
More recently, uncertainties surrounding the global financial crisis significantly limited world cotton demand in MY 2008, while a dramatic run-up in MY 2010 cotton prices to levels not experienced since the U.S. Civil War hampered mill use in MY 2011.
Though the overall severity of the COVID-19 pandemic impact on the world economy remains unknown, the immediate and substantial shock to global cotton mill use has undoubtedly been historic.
