PowerPoint Presentation · 2020. 5. 7. · Tariffs & Cotton Fiber Trade. Source: CN Customs....
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Outline
Long-term structural changes
Tariff timeline
Effects on supply chains
ChinaChinese production Chinese mill-useChina grows less cotton than its mills
consume
average gap is more than one third of mill-use
Source: USDA
Chinese production Chinese mill-use
ChinaChina grows less cotton than its mills consume
Government reserves been filling the gap, but stocks drawn down
Source: USDA
average gap is more than one third of mill-use
ChinaChina grows less cotton than its mills consume Gov’t stocks
at end of 2013/14 were over one and a half years of mill-use
gov’t stocksat end of 2018/19less than three months of mill-use
Sources: Cotlook, USDA
53 mil. bales
Government reserves been filling the gap, but stocks drawn down
ChinaChina grows less cotton than its mills consume
Gov’t stocks at end of 2018/19 should be less than three months of mill-use
Sources: Cotlook, USDA, 2018/19 forecast by Cotton Incorporated
53 mil. bales 9 mil. bales
Government reserves been filling the gap, but stocks drawn down
Gov’t stocks at end of 2013/14 were over one and a half years of mill-use
China
Stabilization of reserves requires imports to equal China’s production deficit- Recent imports near 5 million bales- Recent deficit near 15 million bales- Chinese imports will need to nearly triple
China grows less cotton than its mills consume
Sources: Cotlook, USDA, 2018/19 forecast by Cotton Incorporated
53 mil. bales 9 mil. bales
Government reserves been filling the gap, but stocks drawn down
Gov’t stocks at end of 2013/14 were over one and a half years of mill-use
Gov’t stocks at end of 2018/19 should be less than three months of mill-use
China
Where to get all that cotton?
- Recent imports near 5 million bales- Recent deficit near 15 million bales- Chinese imports will need to nearly triple
China grows less cotton than its mills consume
Sources: Cotlook, USDA, 2018/19 forecast by Cotton Incorporated
Stabilization of reserves requires imports to equal China’s production deficit
53 mil. bales 9 mil. bales
Government reserves been filling the gap, but stocks drawn down
Gov’t stocks at end of 2013/14 were over one and a half years of mill-use
Gov’t stocks at end of 2018/19 should be less than three months of mill-use
U.S. Lower corn and soybean prices boosted acreage
U.S. Lower corn and soybean prices boosted acreage
Weather conditions more favorable than last year
U.S. drought conditions (late July, 2019)
U.S. planted acreage
Sources: USDA, NOAA
U.S. drought conditions (late July, 2018)
U.S. Lower corn and soybean prices boosted acreage
Weather conditions more favorable than last year
U.S. drought conditions (late Aug, 2019)
U.S. planted acreage
Sources: USDA, NOAA
U.S. drought conditions (late July, 2018)
Near record crop forecast22 million bales of production3 million bales of mill-use19 million bales to move16.5 million bale export forecastRecord for exports is 17.7 million
U.S. Lower corn and soybean prices boosted acreage
Weather conditions more favorable than last year
Where to sell all that cotton?
0
5
10
15
20
25existing record
Source: USDA
U.S. cotton production
U.S.
Where to sell all that cotton?
ChinaWhere to get all that cotton?
tariffs U.S. Where to sell all that cotton?
ChinaWhere to get all that cotton?
tariffs July 2018 first pair of lists (list 1, both sides at $34 billion),
U.S. cotton faces a 25 point tariff increase
Sources: Peterson Institute of International Economics, Bloomberg, WSJ
December G-20 meeting, truce called
late June G-20 meeting, truce called
second pair of lists (list 2, both sides at $16 bil.)threats made to hit all U.S. imports from China with increasesJul-Aug 2018
third pair of lists (list 3, $200 & $60 bil.)Sep 2018
sharp reversal in expectations, tariffs on list 3 increase further,U.S. renews threats on all imports from ChinaMay 2019
U.S. raises tariffs on most imports from China not yet covered (list 4a), includes most Chinese-made apparel, China raises tariffsSep 2019
U.S. to raise tariffs on all imports from China not yet covered (list 4b), includes remaining Chinese-made apparel, US cotton hit again by ChinaDec 2019
Oct 2019 U.S. to raise tariffs on Lists 1, 2, & 3 China further (delayed two weeks), talks to take place
50
55
60
65
70
75
80
85
90
95
100 cents/lb.
sharp reversalin expectations
implementation for first list of tariffs set
Tariffs & Cotton Prices
implementation for third list of tariffs set
0
2
4
6
8
10
12
14
16
18
20
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
million balesU.S. export commitment to the world
Tariffs & Cotton Fiber Trade
2018/19
2017/18
5-year avg.
Source: USDA
0
2
4
6
8
10
12
14
16
18
20
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
million balesU.S. export commitment to the world
Tariffs & Cotton Fiber Trade
sales ahead of new crop year were 4th highest ever
still down about two million bales vs 2018/19
2019/20 sales
2018/19
2017/18
5-year avg.
Source: USDA
0
2
4
6
8
10
12
14
16
18
20
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
million balesU.S. export commitment to the world
Tariffs & Cotton Fiber Trade
with 2018/19 carryover, down one million bales
2019/20 sales + carryover
2019/20 sales
2018/19
2017/18
5-year avg.
Source: USDA
still down about two million bales vs 2018/19
sales ahead of new crop year were 4th highest ever
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
U.S. export commitment to Chinamillion bales
Tariffs & Cotton Fiber Trade
0
2
4
6
8
10
12
14
16
18
20
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
million balesU.S. export commitment to the world
2019/20 sales + carryover
2019/20 sales
2018/19
2017/18
5-year avg.
Source: USDA
2018/19
2017/18
5-year avg.
current commitment to China-900k bales (-33%) year-over-year
2018/19 shipments to China are down 1.5 million bales (-35%)
with 2018/19 carryover, down one million bales
still down about two million bales vs 2018/19
sales ahead of new crop year were 4th highest ever
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
U.S. export commitment to Chinamillion bales
Tariffs & Cotton Fiber Trade
0
2
4
6
8
10
12
14
16
18
20
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
million balesU.S. export commitment to the world
2019/20 sales + carryover
2019/20 sales
2018/19
2017/18
5-year avg.
Source: USDA
2019/20 sales + carryover
2019/20 sales
2018/19
2017/18
5-year avg.
current commitment to China-900k bales (-33%) year-over-year
2018/19 shipments to China are down 1.5 million bales (-35%)
2019/20 sales and carryover down 7%with 2018/19 carryover, down one million bales
still down about two million bales vs 2018/19
sales ahead of new crop year were 4th highest ever
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0Chinese fiber imports from world+0.9 million bales (+70%) year-over-year 2018/19
Tariffs & Cotton Fiber Trade
Sources: USDA, CN Customs
change in million bales year-over-yearChinese cotton fiber imports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Aug
Sep
Oct
Nov De
c
Jan
Feb
Mar Ap
r
May Jun Jul
U.S. export commitment to Chinamillion bales
2019/20 sales + carryover
2019/20 sales
2018/19
2017/18
5-year avg.
current commitment to China-900k bales (-33%) year-over-year
2018/19 shipments to China are down 1.5 million bales (-35%)
2019/20 sales and carryover down 7%
+1.8+480%
+1.3+100% +1.0
+200%+0.7
+130%
AustraliaBrazil IndiaOther(mostlyAfrica)
Uzbek-0.0-4%
-0.9-35%
Chinese fiber imports from world+3.9 million bales (+70%) year-over-year 2018/19
U.S.
Tariffs & Cotton Fiber Trade
Source: CN Customs
Chinese cotton fiber imports Exporter outlooks for 2019/20
U.S. forecast to export near record 16.5 mil. bales in 2019/20
Brazil forecast to export 8.5 mil. bales,prices to influence acreage
India forecast to export 4.0 mil. bales, early weather not favorable
Australia forecast to export 1.9 mil. bales, drought affecting planting
W. Africa forecast to export 5.2 mil. bales, steady at 2018/19 levels
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0 change in million bales year-over-year
+1.8+480%
+1.3+100% +1.0
+200%
AustraliaBrazil IndiaOther(mostlyAfrica)
Uzbek-0.0-4%
-0.9-35%
U.S.
Chinese fiber imports from world+3.9 million bales (+70%) year-over-year 2018/19
+0.7+130%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
all fibers
cotton-dominant
volume in billion SME (SA)U.S. apparel imports from China
Source: OTEXA
0%
10%
20%
30%
40%
50%
60%
Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
all fibers
cotton-dominant
Chinese volume over global volume (SA)China’s share of U.S. apparel imports
+0.8+80%
+0.5+200%
Tariffs & Apparel Trade
Source: Cotton Incorporated analysis
Tariffs & Apparel TradePass-through
Of 2010/11 price spike
+150%
+70%
+25%
+8%
RatioRoughly
3:1
+15 ppt
from 17% to 32%
from 20% to 35%
landed costs +9-10%
Theoretical look atImpact of tariffs
retail costs +3%China 40% market share
exchange rates
0
5
10
15
20
25
30
35
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
mmfcotton
Sources: OTEXA, Cotton Incorporated analysis
Tariffs & Apparel TradeU.S. import volume
raw cotton equiv. of US apparel & home imports, mil bales)
1 2 3 45
+15 ppt
from 17% to 32%
from 20% to 35%
landed costs +9-10%
Theoretical look atImpact of tariffs
retail costs +3%China 40% market share
exchange rates
Sources: USDA, IMF
Tariffs & Apparel Trade
0
5
10
15
20
25
30
35
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
mmfcotton
U.S. import volumeraw cotton equiv. of US apparel & home imports, mil bales)
Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
IMF forecasts for 2019 world GDP growth released at different timesGlobal economy weaker
3.2
3.9
1 2 3 45
Headwinds Abating
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2.5Cotton prices stabilized vs polyester
ratio of Chinese cotton to Chinese polyester prices
Sources: Emerging Textiles, IMF
Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
IMF forecasts for 2019 world GDP growth released at different times
3.9
3.2
Global economy weaker
Headwinds Abating
40%
45%
50%
55%
60%
65%
70%
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2.5 ratio of Chinese cotton to Chinese polyester pricesCotton’s share of U.S. apparel
based on raw fiber equivalence of U.S. imports
Sources: Emerging Textiles, USDA
Cotton prices stabilized vs polyester
Headwinds AbatingGarment weights stabilized Cotton’s share of U.S. apparel
based on raw fiber equivalence of U.S. imports
Sources: Cotton Incorporated analysis, gov’t trade agencies
85
90
95
100
105
110
115
120
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
U.S.
E.U.
Japan
indexes of garment weight in the U.S., the E.U., and Japan (apparel of all fibers, 2006-07=100)
40%
45%
50%
55%
60%
65%
70%
40
50
60
70
80
90
100
110
120
130
Outlookmillion bales
Global demand back on trendTime of transition- Chinese reserves drawn down- U.S./exporter production higher
Tariffs adding uncertainty- U.S. fiber exports to China- U.S. apparel imports from China- Global economic growth
Source: USDA