With polyester and cotton prices converging on the world market, the International Cotton Advisory Committee (ICAC) expects world consumption of cotton to increase by five percent to 24.5 million tons in 2014/15.
According to the recent ICAC Secretariat report, many spinners decreased the share of cotton in yarn in favor of greater use of polyester after international cotton prices spiked in 2010/11. At the start of 2013, the gap between cotton and polyester prices widened, as polyester prices remained fairly stable at around 74-76 cents/lb until dropping to 65 cents/lb in April of this year.
During the same period, international cotton prices climbed higher, reaching 99 cents/lb at their peak.
The situation changed significantly in July, with the Cotlook A index falling to 80 cents/lb while polyester has climbed back to nearly 73 cents/lb. Furthermore, the price of cotton in China has also fallen from around 141 cents/lb during most of 2013/14 to around 126 cents/lb in the last few weeks.
In addition to their world forecast, ICAC expects cotton consumption in Asia to grow strongly in 2014/15, led by China’s five percent increase to 7.9 million tons. India’s consumption could grow by six percent to 5.4 million tons. The rest of Asia is projected to expand by eight percent to nearly 2.4 million tons.
World production in 2014/15 is forecast to be 25.5 million tons, down from 26.1 million tons in 2013/14. Although the monsoon has arrived in India, the volume of precipitation has varied widely, and yield is likely to suffer in some places. India’s production is expected to be just over 6 million tons in 2014/15.
On the other hand, China – with average yields nearly three times higher than India – is expected to produce around 6.2 million tons. The United States has experienced abundant rains this season, and its production is projected to grow to nearly 3.5 million tons.
Trade is forecast to decline to 7.9 million tons in 2014/15, driven mainly by a 26 percent fall in imports by China to 2.2 million tons. India’s exports are likely to fall to 800,000 tons, which would be less than half of its exports in 2013/14. Exports from the United States are forecast to rise nine percent to 2.5 million tons in 2014/15.
The Chinese government will close out 2013/14 having sold around 2.3 million tons of cotton, which is 37 percent of the 6.3 million tons purchased this season. As this is the second successive year in which total purchases by the government exceeded sales, government stocks have increased again, and China’s total ending stocks are now estimated to be nearly 11.9 million tons.
World stocks outside China are up six percent to 8.6 million tons. This is the largest volume of world ending stocks outside China since 2007/08, when they reached 8.8 million tons, and is weighing heavily on prices for 2014/15.
Source – ICAC