Global Cotton Consumption Projected to Reach Four-Year High

Global cotton consumption is forecast to rise to 116.9 million bales in the 2024/25 marketing year, marking a four-year high and a significant increase from the previous year's consumption level, according to a report by the US Department of Agriculture (USDA) published on Friday. This upward trend is attributed to several factors, including greater cotton supplies, low global inventories of cotton textiles and products, and expectations for robust economic growth.

The USDA reports that "greater cotton supplies and low global inventories of cotton textiles and products are expected to boost future use," noting that "consumption is forecast to grow 3.0 percent year-over-year, double the long-term annual average of 1.6 percent since 1960/61."

Inventory Replenishment Drives Consumption Growth

A key driver of the projected consumption growth is the anticipated replenishment of inventories along the cotton supply chain. Current textile and product inventories are significantly lower compared to previous years, as indicated by recent global cotton fiber consumption and cotton product import levels.

Clothing retailers have experienced reduced import demand due to excess inventories accumulated during the pandemic, coupled with higher inflation, financing costs, and economic slowdown in the European Union. However, recent annual imports are below the 10-year average, suggesting an upcoming trend of inventory replenishment.

US Consumer Demand Remains Strong

The United States, the largest importer of cotton products, continues to exhibit strong consumer demand for apparel, supported by robust levels of discretionary income, low unemployment, and rising wages. Despite the economic challenges of the past year, US consumer spending has remained resilient, with wholesale and retail product inventories declining amid strong purchases.

Economic Growth and Favorable Supply Dynamics

The USDA cites prospects for global economic growth as a factor supporting higher cotton consumption. The International Monetary Fund (IMF) projects global GDP to grow by 3.2% in both 2024 and 2025, with contributions expected from both advanced and emerging economies.

Larger global cotton supplies, coupled with more stable operating costs for spinners, including financing and energy, are also expected to boost consumption. The lagged effects of previous price volatility and rising interest rates continue to exert some pressure on consumption, but the IMF's forecast of declining fuel prices and interest rates in major economies should provide relief in the coming years.

"Larger global supplies are also expected to boost consumption. The sum of beginning stocks and production is projected at nearly 200.0 million bales, more than 5.0 million bales higher than the previous year and the highest level in 4 years," states the USDA.

Overall, the USDA's forecast points to a positive outlook for the global cotton market, with strong demand driven by inventory replenishment, robust economic growth, and favorable supply dynamics.