The food crisis triggered by the Russian-Ukrainian conflict has not yet subsided, and extreme weather has begun to reduce crop production around the world.
Almost all of the world's largest cotton suppliers have reportedly cut production this year due to extreme weather. In India, the world's largest cotton producer, this summer's torrential rains and pests and diseases have severely affected the country's cotton production, and the largest cotton producing countries have had to import cotton from overseas.
In the United States, the world's largest cotton exporter, increasingly severe dry weather is expected to reduce the country's cotton production by 28 percent this quarter to its lowest level in more than 10 years, and U.S. cotton stocks are also expected to fall to near-record lows.
Brazil, the second-largest cotton exporter, has also experienced hot and dry weather and has reduced the country's production by nearly 30 percent. Brazil's dry weather has already killed about 200,000 tonnes of cotton, according to Abrapa, a Brazilian agricultural group, and the country's production is expected to fall to 2.6 million tonnes or less in the coming harvest season.
Bom Futuro Group, one of Brazil's largest cotton producers, expects production to fall 27 percent from the previous quarter. The group's cotton acreage accounts for about 10% of the total Brazilian area.
Extreme weather has led to a sharp 30% spike in cotton prices and may continue to rise in the second half of the year
As extreme weather has sparked supply concerns, the U.S. Intercontinental Exchange (ICE) cotton futures price has soared 30 percent in the past month.
Earlier this year, cotton prices soared to their highest levels since 2011, squeezing profit margins for global apparel suppliers and pushing up costs for apparel and other cotton products.
Earlier this week, Jane Elfers, CEO of Children's Place, North America's largest children's retail brand, bluntly said on an investor call that the spike in cotton prices was "a very, very big problem we face" and that the company hopes to see a pullback in cotton prices in the second half of the year.
But the decline in production in the largest cotton-producing countries has made the future market less optimistic – the United States and Brazil alone account for half of global cotton exports.
U.S. government and analysts had previously expected global cotton demand to decline due to a decline in apparel purchases and an economic slowdown, especially in Europe and Asia.
However, Andy Ryan, senior relationship manager at Market Analyst Hedgepoint Global Markets, believes that all indications are that the downward pressure on the cotton supply side is far greater than the demand side, and as cotton production declines, cotton prices will "rise sharply" in the coming months.
Not only cotton, but also corn, wheat and other yields will also be affected
The recent extreme heat weather of more than 40 °C in the northern hemisphere is endangering the production of crops around the world.
Because, when the temperature is higher than 38 ° C, it will inhibit the growth of many crops, including rice, corn, wheat, etc., especially will reduce the pollen fertility of many crops, resulting in a decline in the fruiting rate, resulting in a significant reduction in crop yield. At the same time, high temperatures can also cause crop filling and incomplete grains, which significantly reduces the quality of grains.
Last month, Chicago corn prices hit their highest increase in nearly a year as fears that the sweltering heat raging in the Midwest might affect corn production. It was the pollination period of maize, which was also the period of maize flowering, which was the most critical developmental period that determined yields, and the high temperatures and little rain during pollination often led to a decline in yields.
In addition, according to studies, every 1°C increase in global average temperature will lead to a 6.0% reduction in wheat yields, 3.2% reduction in rice yields, 7.4% reduction in maize yields, and 3.1% reduction in soybean yields. It is predicted that by 2040, high temperatures have the potential to reduce global food production by 30 to 40 percent. At the same time, with the continuous increase of population and the rigid growth of food demand, global warming is bound to bring great challenges to the future development of agriculture.
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Will cotton prices rise in the coming months?