The ongoing coronavirus pandemic has severely disrupted global supply chains and the cotton sector is no exception. Bangladesh's primary textile industry is almost completely dependent on imported cotton as local growers can meet less than 3 per cent of the country's annual consumption.
For details on how the Covid-19 fallout has affected cotton trade, The Daily Star's senior staff reporter Refayet Ullah Mirdha took an interview of Bruce Atherley, executive director of Cotton Council International, a non-profit trade association that promotes US cotton products around the world. Below are excerpts of the online conversation.
The Daily Star (DS): What is the current state of the global cotton trade market amid the Covid-19 outbreak?
Bruce Atherley: The Covid-19 pandemic has caused unprecedented disruptions to the global supply chain for cotton and textile industries and subsequently the US markets. The collapse in demand for cotton has been felt across the US, from textile manufacturers to cotton growers and all segments in between.
Besides, due to the sharp drop in demand and resulting price pressure, the US cotton industry has faced many adversities in its efforts to contain the virus. Retail outlets were shuttered, billions of dollars of orders were cancelled and manufacturing facilities in key markets for yarn and other fabrics were closed down as the country implemented a full lockdown.
Meanwhile, the merchandising and distribution channels are facing increased costs for storage, bank interest, insurance and other carrying costs associated with delays in commodity merchandising and consumption.
Despite the widespread availability of clothing and textile products through online shopping platforms, the uncertainty surrounding the coronavirus pandemic forced many consumers to limit their spending on non-essential items.
Moreover, the reduced sales and store closures led to massive layoffs in the US apparel/textile retail industry.
DS: Do you think global cotton consumption will decline due to fall in sales of clothing items around the world?
Atherley: Prior to the Covid-19 outbreak, it was estimated that all the mills worldwide collectively produced 121 million bales of yarn for the 2019 crop year.
The World Agricultural Supply and Demand Estimates, a comprehensive monthly report published by the US Department of Agriculture (USDA) on the supply and demand for major crops and livestock, has estimated that the mills would produce 102 million bales of yarn for 2019, about 19 million bales lower than the pre-outbreak estimation.
DS: How is man-made fibre eating up global cotton trade and what is the current ratio of cotton fibre and man-made fibre (MMF)?
Atherley: The 70/30 split between MMF and cotton continues. However, consumer attitudes remain more positive toward cotton and other natural fibres as opposed to MMF, particularly in terms of sustainability, comfort and quality.
Innovations in cotton also can give it functional performance benefits that have been attributed to MMF in the past, especially with active wear.
DS: Is China still a major producer, trader and consumer of cotton globally? If yes, why?
Atherley: In the 2019-20 marketing year, China accounted for just over 22 per cent of total world cotton production. China exports only a small amount of cotton lint, 0.5 per cent of its production. Most of the remaining exports are re-exports of foreign cotton from consignment warehouses.
Besides, China is the world's largest importer of cotton. This provides China with a supply of cotton normally greater than one-third of world use and nearly 40 per cent larger than India.
DS: What is the global outlook on cotton production and who do you think are the major producers of cotton for this year?
Atherley: The US is the third largest cotton producer after India and China in that order. The top international markets for US cotton are Vietnam, China, Pakistan, Turkey, Bangladesh, Mexico, and Indonesia.
In recent years, Vietnam has emerged as the largest international market for US cotton while Bangladesh is an emerging market that continues to grow. Our local mills are also a big market for the product.
DS: How much of the previously stocked cotton is still available and do you think that merging this old stock with the new harvest will create an oversupply of cotton this year? Also, what is the current cotton consumption trend?
Atherley: Current USDA estimates show that global consumption in 2019-20 and 2020-21 combined will be just under 25 million bales with the 2020-21 coming down 15 per cent from the February outlook projections.
Meanwhile, world production forecast for the same year is virtually unchanged and Covid-19's negative impact on cotton demand was too late in the season to shift planting decisions away from cotton for most major producing countries.
This has pushed the stocks-to-use ratio back into the 90 per cent range, meaning mills will continue to buy on a hand-to-mouth basis while maintaining little buffer stocks.
DS: Do you think cotton consumption in Bangladesh could increase in the near future? If yes, why? And how much cotton do you think our local mills might consume in the next five years?
Atherley: It depends on the volume of work orders for garments items that will be placed by international brands and retailers. It is not possible to estimate the consumption of cotton for 5 years in Bangladesh.
DS: Does your organisation have any plans to open an office in Bangladesh? How has the import of US cotton increased in the country over the last five years?
Atherley: Cotton Council International has had an international representative in Bangladesh for many years. Bangladesh is an emerging market and continues to become a larger importer of US cotton.
US cotton has more than quadrupled its share of the imported cotton market in Bangladesh, going from about 3.5 per cent in 2015 to 15 per cent in 2019.
COTTON USA, a trademark of Cotton Council International, holds various events in Bangladesh, such as the recent virtual Cotton Day, that has helped the local industry get updates on US cotton and learn how it can help boost their businesses.
DS: Why do you think the import of US cotton is growing in Bangladesh?
Atherley: Mills and manufacturers in the country trust US cotton because of its quality, sustainability, transparency, innovation and premium value. Every bale is tested so that quality is guaranteed and our cotton provides a better spinning consistency.
Ongoing COTTON USA technical servicing in Bangladesh to help mills understand how to fully utilise US cotton has led to a greater understanding and appreciation of the product's net value.
DS: Do you think Bangladesh's garment export will increase significantly despite the current pandemic? What is your forecast about it?
Atherley: It is difficult to make a prediction, but it will depend on how garment buyers shift their sourcing from China and to other countries. It appears that garment buyers are shifting to India and Pakistan in addition to Vietnam and Bangladesh.
DS: Please describe the issue of double fumigation of US cotton in Bangladesh.
Atherley: There is an ongoing discussion between both governments, and we are hopeful that the issue will be resolved.
DS: Do you think Bangladesh's GSP status with the US could be reinstated?
Atherley: This matter is between the governments.
DS: What is the value of US cotton that you have exported to Bangladesh per year in the last 5 years?
Atherley: Cotton exports to Bangladesh have been in the average range of about $500 million per year for the last five years.