China’s cotton stocks-to-use ratio surged to a record level of 180 percent in 2013-14, due to the Government’s price support and import policies, according to the Foreign Agricultural Service (FAS) of the United States Department of Agriculture (USDA).
From 2002-03 to 2008-09, China’s stocks-to-use ratio averaged just 49 percent, which implies that the current stocks are over 45 million bales above average, FAS says in its ‘Cotton: World Market and Trade’ report released this month. At approximately two and a half years of U.S. production, the current Chinese cotton stocks are abnormally high, and to reduce these and return to normal levels, China would have to produce less, consume more, and/or reduce net imports.
In other words, “Production would have to drop by 25 percent from the current level for six years, consumption would have to rise by 20 percent for more than six years, or imports would have to be reduced to the World Trade Organization tariff rate quota level for 16 years,” says the report. In the present scenario, it will be a daunting task for the Chinese Government to implement policies to reduce its cotton stocks, and hence the excess stocks are likely to remain for a while.
For 2014-15, US cotton exports’ estimate is lowered by 700,000 bales to 10 million, and Uzbekistan down 150,000 bales to 2.3 million bales—both due to a decrease in production, according to the USDA. India, another major cotton exporter, is also expected to export only 5.7 million bales in 2014-15, due to weaker global import demand. On the other hand, Pakistan, India, Turkey and Vietnam are likely to import 1.6 million, 800,000, 3.75 million, and 3.4 million bales of cotton during the period. (RKS)
