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National Cotton Council economists point to a few key factors that will shape the U.S. cotton industry’s 2020 economic outlook.
This past year can be characterized as a year with significant uncertainty and volatility in the global economy and the world cotton market. On January 15, 2020, Trump signed the Phase 1 trade agreement with China. As part of the agreement, China has agreed to purchase an average of $40 billion in U.S. agricultural commodities, including cotton, over the next two years. However, the overall impact for cotton remains uncertain as commodity specific details have not been released.
While the Phase 1 trade agreement provided some cautious optimism for an improvement in the cotton economic situation, the China coronavirus outbreak in the early weeks of 2020 could delay China’s ability to increase purchases in the near-term. As a result, the potential impacts of the coronavirus represent a significant wildcard in the outlook for the world cotton market in the 2020 crop year.
In her analysis of the NCC Annual Planting Intentions survey results, Campiche noted that export markets continue to be U.S. raw fiber’s primary outlet. World trade is estimated to be higher in the 2019 marketing year, but the retaliatory tariffs and increased competition from other major exporting countries has led to a sharp decline in the U.S. trade share in China. Despite the continued U.S.-China trade disruptions, U.S. export sales to other markets have been very strong for the current crop year.
Sales reached the highest level in the marketing year during the week ending on February 6. While export competition from Brazil remains strong, the U.S. has had increased opportunities for export sales to other markets in the 2019 crop year. Lower production in Australia, Pakistan, and Turkey has led to higher U.S. export sales. As a result, the United States will remain the largest exporter of cotton in 2019 with 16.5 million bales.
Prior to the implementation of tariffs, the United States was in a prime position to capitalize on the increase in Chinese cotton imports. With the imposition of the 25.0 percent tariff, China has turned to other suppliers during the 2018 and 2019 marketing years, allowing Brazil, Australia, and other countries to gain market share. Vietnam is currently the top export market for U.S. cotton in the 2019 crop year, followed by China and Pakistan.
U.S. exports are projected to drop slightly to 16.4 million bales in the 2020 marketing year. For this outlook, the U.S. is assumed to export 2.5 million bales to China in the 2020 crop year as compared to an estimated 2.0 million bales in the 2019 crop year. However, with record stocks outside of China, increased production in Brazil, and a partial recovery in Australia’s production, the U.S. will continue to face strong export competition in 2020.
Based on the underlying assumptions and resulting cotton balance sheet, stable stocks outside of China, increased export competition from Brazil, recovery in Australia’s production, and low manmade fiber prices will have a bearish influence on cotton prices. A quick containment of the coronavirus and a successful implementation of the Phase 1 trade agreement would provide support to prices.
"Though the Bangladesh RMG sector witnessed insignificant growth during the fiscal years 2016-17 and 2017-18, growth rate picked up the following year owing to Taka’s depreciation and a rise in exports to the United States. However, now the country’s major export-earning industry faces a number of challenges."
Though the Bangladesh RMG sector witnessed insignificant growth during the fiscal years 2016-17 and 2017-18, growth rate picked up the following year owing to Taka’s depreciation and a rise in exports to the United States. However, now the country’s major export-earning industry faces a number of challenges.
One major challenge is the weaning off of preferential trade benefits like Generalised System of Preferences (GSP) once it graduates as a middle-income country. This will lead to loss in cost competitiveness that can be detrimental for the apparel sector. Another challenge is the evasion of low value-low margin market segment that produces volume-driven products.
Sub-contracting hinders development of high-end products
The sector also lacks the capacity to produce products with higher ticket prices as sub-contracting is a big issue
in the industry. Apparel companies currently in operation need assistance to develop their organisational and human resources skills. Still, the country has been able to change foreign buyer’s perception about the sector mainly on account of the pressure exerted by the Accord and Alliance Bangladesh.
However, compliance interfere with profit margins of these companies as small and medium enterprises (SMEs) often fail to comply with labor laws and buyers' codes of conduct. They fail to send shipments on time and suffer from liquidity crisis and thus are unable to pay worker's wages timely. Therefore, they the face risk of losing business. Consequently, there will be a rise in unemployment rates.
Creating export-oriented sector for employment generation
On the other hand, as large factories meet compliance requirements, workers who lose their jobs on account of shutting down of inefficient factories may attain employment in large factories. However, majority of workers still stand to lose their jobs. To prevent this, Bangladesh needs to ensure inclusive development and create export-oriented sectors, in order to generate quality jobs.
The RMG sector also needs to balance setting up of minimum wages with maintaining the sector’s competitiveness. As a consequence, some factories have opted for automation to reduce their dependency on labour. Automation will have adverse effects on workers employed in the RMG industry.
Despite these challenges, the RMG sector has set a target of $50 billion exports by 2021. This target can be reached if the country focuses on inclusive growth by introducing a strong wage policy and making timely adjustments to minimum wages prior to consultation.
Survey Shows Coronavirus Impact on Chinese Textile Industry -Part II
The Survey analysis continues to shed light on production expectation at the end of February after the first part of the report is focused on the situation that was seen and expected before the middle of this month. To our dismay, only 18.1% of all the 1201 respondents under the survey reported to recover their capacity up to over 70% while 23% of them could have 50%-70% revitalized, and nearly 60% of the total companies in the survey are in the view that they are able to get the lines running in 50% or less, a gloomy picture if their answers turn out to be true.
A national online survey in Questionnaires was conducted by China National Textile and Apparel Council(CNTAC) from Feb.7-10, with a report circulated only to limited readership to show a comprehensive outlook and insight of the textile industry by specific sectors in different provinces on the basis of 1201 respondents, just a sample of the whole textile economic fabric if we can see wood and see forest. Continuing here with Part II of survey analysis, as how the Chinese production is expected to pick up by the end of Februry.
These answers are not persistently consistent if we look into the different sectors in the up-mid-down streams of the whole textile industry. Obviously, as massive consumption on shopping boom is not optimistically foreseen at the moment when consumers are not encouraged to expose themselves to outdoor activities, the garment and home-textile industrial sectors that produce finished goods are subject to a bit harder impact brought forth by necessarily strict measures for disease prevention and control, leading to a slow production recovery, to such an extent that only 10% and 12.4% respectively from these two sectors expressed their belief that they both will re-steam their production up to over 70 percent at the end of the month, far short of what is expected. Noticeably, the number of companies foreseen to run the factory less than 20% of the rated capacity takes up a considerable bulk of the total respondents in these finished-goods sectors, 35.2% and 33% each. Every cloud has its silver lining, the manmade fiber and industrial textile sectors present a sunny side of the picture, with 39.4% and 25% of their companies in the survey promising to regain production to over 70% of the full capacity.
If we see the production to be re-energized to run capacity in the provinces that were chosen as important sampled regions, Henan province in Central China is more optimistic with 43.5% of the respondents ready to gear up to over 70 percent of the production capacity at the end of February.
If we see the picture based on companies’ size and scale in the sales income profile and employment, it is reasonable to find that the bigger the company is, the better the company runs in capacity resumed.
The following table shows 30.6% of the big companies are able to recover 70 percent of the installed capacity, while only 10.7% of the small ones can do the same. Some smaller ones or micro companies, 63.9% of them, are devoid of such an aim, expected to resume less than 20% of their production at the best when it comes to the end of February.
Production to be Recuperated in the Companies under Survey in Different Size & Scale by Annual Sale and by Employment
(To be continued)
Contributed by Mr. ZHAO Hong
He is working for CHINA TEXTILE magazine as Editor-in-Chief in addition to being involved in a plethora of activities for the textile industry. He has worked for the Engineering Institute of Ministry of Textile Industry, and for China National Textile Council and continues to serve the industry in the capacity of Deputy Director of China Textile International Exchange Centre, V. President of China Knitting Industry Association, V. President of China Textile Magazine and its Editor-in-Chief for the English Version, Deputy Director of News Centre of China National Textile and Apparel Council (CNTAC), Deputy Director of International Trade Office, CNTAC, Deputy Director of China Textile Economic Research Centre. He was also elected once ACT Chair of Private Sector Consulting Committee of International Textile and Clothing Bureau (ITCB)
UK retail is reeling from the affects of Chinese Coronavirus. Delays in product deliveries will impact high streets already reeling from a dismal Christmas. Until January 23, sales forecasts for 2020 were looking good. But with some Chinese cities now on full or partial lockdown, and a spike in new cases, shopping malls are deserted, workers are at home, and the luxury goods industry is seriously worried.
UK companies are closing their offices in China. Whether Chinese consumers come over to the UK to shop and spend, or whether they go up there into their own cities to shop for UK brands, it's going to cause a problem, because there's just no product and there's nobody there to retail the product. If products haven't been on the seas a few weeks ago, there is going to be a delay of up to two or three months, and if that happens, the question is whether customers are going to want it at that stage. Though high end goods like Burberry and John Smedley are still manufactured in the UK, mid-range quality like M&S is being outsourced to China.
UK retailers are now facing delays to their spring fashion collections of at least four to six weeks. At London Fashion Week 2020, Chinese buyers were missing.
Bestseller has intensified its long-term partnership with BSR's HERproject™, a collaborative initiative that strives to empower low-income women working in global supply chains. The new strategic partnership will help Bestseller accelerate towards its Fashion FWD goal of supporting 100,000 women in Tier 1 factories to achieve workplace empowerment and improved life skills.
In addition, Bestseller has become a Catalyst Member of HERproject™, making it possible to take a leading role in furthering the impact of HERproject™ by providing strategic advice and thought leadership to steer the direction of the program. BSR's HERproject™ is a collaborative initiative that strives to empower low-income women working in global supply chains. Through its HERhealth™ and HERfinance™ programs, women develop knowledge and skills on health issues and financial management topics. The HERrespect program focuses on addressing the root causes of violence and sexual harassment against women in the workplace.
To date, Bestseller’s work with HERproject™ has reached more than 37,000 women in Bestseller’s supply chain across Bangladesh, Cambodia, China, India, Pakistan and Vietnam. Factoring in HERproject™ programmes supported by other brands, the total number of women in Bestseller’s supply chain is just over 50,000.
The Tiruppur Export Association (TEA) has welcomed the Budget allocation of Rs 1,224 crore to the development of handlooms and textiles businesses in Tamil Nadu. The association welcomed the expanding of benefits available under Prime Minister’s Employment Generation Programme (PMEGP) and the Unemployed Youth Employment Generation Programme (UYEGP). The budget also enhanced the existing project size limit of Rs 10 lakh to Rs 15 lakh and eligible subsidy under the scheme to Rs 2.5 lakh. The provision for this scheme has been enhanced to Rs 33 crore in the Budget estimates 2020-21.
The budget also allocated Rs 500 crore for environmental clearance under the Athikadavu-Avinashi irrigation scheme. Interest subvention under the Technology Upgradation Scheme and the Credit Guarantee Fund Trust scheme has been increased from 3 per cent to 5 per cent. He appreciated enhancing of the maximum capital subsidy under the NEEDS scheme from Rs 30 lakh to Rs 50 lakh and the Rs 100 crore fund allocation for this scheme in the Budget estimates 2020-21. Reduction in stamp duty for rental agreements under the new Tenancy Act to 0.25 per cent from 1 per cent and registration charges on such agreements to 0.25 per cent from 1 per cent subject to a maximum of Rs 5,000 was also seen as a welcome move.
The 14th edition of Liberty Fairs trade show was held from February 4-6 at the Sands Expo Convention Center in Las Vegas. The recent show marked one of the only times that the contemporary dual-gender trade show ran solo as its sibling show, Agenda, was on hiatus. The February Liberty show also worked on a different schedule. It started a day before the MAGIC trade show, which ran February 5 to 7, 2020.
The show enjoyed a major surge of buyer traffic on February 6, the last day of the show. Its sprawling 2,500 sq. ft. section exhibited brands such as a resurgent Ed Hardy, which experienced a plummet in popularity shortly after the Great Recession. T&A exhibited a preview of the once wildly popular brand at Liberty in August 2019. For the most recent show, it exhibited a wider selection of the tattoo-inspired Ed Hardy along with a stable of other brands including Le Cruz, Oren Kash and Oublier Collective.
Brands exhibiting at the show ranged from suiting from the Pal Zillieri label and John Varvatos Signature Tailored, motorcycle jackets from Schott NYC, denim from Levi’s, Naked & Famous, Neuw Denim and Railcar Fine Goods, as well as streetwear from Billionaire Boys Club and Defend Brooklyn.
Vendors also produced big activations such as a coffee lounge put together by Calik Denim, a custom-T-shirt station produced by Jack & Jones and Re/Up screen-printing its sustainable T-shirts.The show also hosted a vintage cash-and-carry section.
K V Srinivasan, Chairman of the Cotton Textiles Export Promotion Council (TEXPROCIL) has appreciated the government’s move to revise duty drawbacks rates from February 4, 2020. He feels, this will improve competitiveness of these products in the export markets.
The increase in the drawback rates is on account of various factors such as the changes in the duties, price (CIF) of imported inputs, FOB value of exports, import intensity etc. Srinivasan feels, the announcement comes as a huge relief to exporters who are already reeling under various types of pressures both internally and externally. Srinivasan further urged the government to reimburse all other taxes and duties that remain un-neutralised through the new scheme RODTEP (Remission of Duties or Taxes on Export Products), which should cover the entire value chain of Cotton textiles.
Sourcing at Magic was held in the US from February 4 to 7, 2020. Representing Madagasar’s female artisans, a group of first-time attendees exhibited ecologically sound goods that promoted fair wages and elevating the status of women in the region who are economically challenged. The brand, Kapuau’i, based in Hawai, which makes scarves and kimono tops, found potential partners in Vrijesh Natural Fiber and Fabrics and Kish from India to source fabrics from. The Purple Store is celebrating its 15th anniversary and sells only purple items. Yana, which makes soft, quality T-shirts, was searching for supply-chain partners. It wants to shift its US manufacturing to production in Mexico or with a South American partner. The Common Link offered options for brands of all sizes, whether they sought domestic manufacturing or production abroad.
The 2019 trade show focused on sustainability through technology and featured innovative VR experiences as well as the latest in production and design tech and sourcing tools. It explored both smart design and advanced manufacturing as well as ways of making the fashion industry more efficient and sustainable, displaying new devices presenting breakthroughs in 3D to 2D digital pattern rendering, virtual inventories, digital direct-to-garment printing and on-demand manufacturing.
The apparel industry in the US has had a tough start to 2020. Consumers are buying fewer and fewer items to stock their closets, and companies that typically sell tons of winter coats and sweaters faced cold January.
Receipts at clothing stores dropped 3.1 per cent last month, the most since March 2009. Women’s apparel was its weakest category during the holidays. Retailers are reworking some of their private label apparel brands in a bid to win back shoppers. Tops, dresses and pants are lying unsold in stores. Baby boomers are aging and buying less clothing than they used to. Millennials are not inclined to spend as much on their wardrobes. Instead, new options like Rent the Runway — where users can pay a monthly fee to rent items to wear to work, to the gym, on vacation and on the weekends — and Stitch Fix — where customers pay to have personalized boxes of clothes shipped to them — are gaining in popularity. The casualization of the workplace also means women and men aren’t buying expensive suits and skirts to wear around the office. Instead, many can get by with jeans and jogger pants. Second-hand apparel is also in style, as shoppers are increasingly thinking about how they can create less waste when they shop.
