According to the International Cotton Advisory Committee (ICAC), excess cotton stocks held outside China are likely to keep international cotton prices down in 2015-16.
Stocks outside China are projected to surge 26 per cent to 9.4 million tons, the highest level in 35 years and also the reason, why ICAC forecasts that these stocks will keep global prices down.
In its latest report, ICAC projects world acreage under cotton to decline 7 per cent from 2014-15 to 31.2 million hectares in 2015-16.
Assuming a world average yield of 765 kg/ha, production in 2015-16 is forecast to be down 9 per cent at 23.9 million tons as against in 2014-15.
After reaching a record acreage of 12.3 million hectares in 2014-15, acreage in India is forecast down 5 per cent to 11.6 million hectares and production is also expected to fall 3 per cent to 6.4 million tons in 2015-16.
The Chinese government announced a cotton subsidy price of 19,100 Yuan per ton for 2015, a decrease from 19,800 Yuan per ton in 2014.
Accordingly, ICAC said, acreage in China is expected to contract 12 per cent to 3.8 million hectares and production could fall 16 per cent to 5.4 million tons.
According to ICAC, in the US, prices for some competing crops are likely to discourage farmers from planting cotton, and acreage is expected to dip 17 per cent to 3.3 million hectares.
“Assuming an average yield of 912 kg/ha, production in the US could reach 3 million tons in 2015-16,” the cotton trade body informed.
Pakistan’s production is on track to reach over 2.3 million tons in 2014/15, around 100,000 down from peak production of 2.4 million tons it achieved in 2004-05.
Pakistan’s average yield is expected to set a new record in 2014-15 and is projected to be higher by 14 per cent to 810 kg/ha.
However, in response to low prices, cotton acreage in Pakistan is forecast down 6 per cent to 2.7 million tons and production to also descend 11 per cent to 2 million tons in 2015-16.
ICAC said in the last two seasons, sales from China’s national reserve were well underway in April with around 1.3 million tons sold at the end of April 2013 and 1.4 million tons at the end of April 2014.
Although China announced last spring that it was ending its reserve policy, the Chinese government still holds over 11 million tons and sales were initially anticipated to occur this spring.
However, sales have not yet begun and the Chinese government has not announced an official date for sales to start this year.
To bolster sales of cotton from the current season’s crop and potentially sales from reserves, the Chinese government limited import quota in 2015 to the volume required under WTO rules of 894,000 tons.
ICAC adds that although Chinese domestic prices have fallen, they are still relatively high compared to international prices and also to polyester prices.
“China is expected to end 2014-15 with 12.4 million tons of cotton stock, up 3 per cent from last season,” it observed.
World consumption is forecast to rise 2 per cent to 24.1 million tons in 2014-15 and just before the start of 2014-15, cotton prices fell quickly while polyester prices remained flat.
“However in the following months, polyester prices have also dropped, diminishing the likelihood that cotton will regain market share from polyester,” ICAC noted.
ICAC projects that cotton consumption is likely to grow modestly next season, driven by increases in population and moderate economic growth.
In 2015-16, world consumption is projected to expand 2 per cent to 24.5 million tons as spinning shifts from China to the rest of Asia.
Low domestic cotton prices may enable cotton consumption in China to rise 2 per cent to 7.7 million tons in 2014-15 after falling for four consecutive seasons.
However in 2015-16, ICAC expects Chinese consumption to remain stable at 7.7 million tons as domestic yarn competes with imports.
In the first three months of 2015, imports of cotton yarn into China mounted 15 per cent to 590,500 tons compared with the same period in 2014.
“After a significant fall in 2014-15 to 7.5 million tons, world imports are expected to stage a partial recovery, increasing 3 per cent to 7.7 million tons in 2015-16,” ICAC concluded by saying.
