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NCC: High Levels of Global Stocks Will Make 2015 Challenging

National Cotton Council economists say 2015 will be another challenging year for the U.S. cotton industry, with global cotton stocks still at very high levels and uncertainties remaining about global mill cotton use.

Gary Adams, NCC vice president for Economics & Policy Analysis, told delegates at the NCC’s Annual Meeting in Memphis that, “While world mill use in 2015 is expected to exceed world production in 2015, the differential does little to reduce global cotton stocks.”

Regarding domestic cotton mill use, Adams sees ongoing growth in U.S. textile industry consumption in 2015, with the Economic Adjustment Assistance Program continuing to spur investment in U.S. mills. He projects a 100,000-plus bale increase in U.S. mill cotton use, bringing total use to 3.7 million bales in 2015.

He said exports continue as the primary outlet for U.S. raw fiber. China is still the leading customer, even though that country’s imports have declined over the past year.

Adams said that China has amassed more than 50 million bales in its government reserves, thus leading to less need to import cotton from the world market. For 2015, China’s imports are projected at 6.2 million bales – down from 7.1 million in 2014 and well below levels observed in 2011 through 2013.

China’s mill use, though, is only seen realizing modest growth in 2015, Adams noted. He said that China’s cotton price is almost twice the price of polyester – a relationship that is not allowing cotton mill use in China to recover.

India is projected to continue as the world’s largest cotton producer, with an anticipated 5.9 million bales for export in 2015. Adams said, though, “The potential for greater exports exists if the (Indian) government chooses to be more aggressive in the pricing of cotton from reserves.”

Adams projects U.S. offtake of 14.3 million bales in 2015, leading to a decline of 250,000 bales in ending stocks. A world cotton stocks reduction of 440,000 bales, though, will do little to reduce global inventories that begin the year at 109.8 million bales.

“In addition, stocks outside of China – an important barometer of price conditions – are projected to increase by 900,000 bales,” the economist said. “Record levels of cotton stocks, smaller imports by China, weakness in other commodity markets, and a strengthening dollar have created a bearish climate for U.S. and world cotton prices. The “A” Index and December cotton futures are at levels not seen since 2009.”

In his analysis of the NCC Annual Planting Intentions survey results, Adams said the NCC projects 2015 U.S. cotton acreage to be 9.4 million acres, approximately 15 percent less than 2014. Taking into consideration average abandonment and yields in line with recent trends for each state, a harvested area of 8.2 million acres across the Cotton Belt is projected, with production of 14.0 million bales – 13.3 million bales of Upland and 700,000 bales of extra-long staple fiber.

He said a question mark for 2015, though, is cotton acreage outside the United States, as projections do not see other countries matching U.S. cotton producers’ 15 percent cotton area reduction.

Additional details of the 2015 Cotton Economic Outlook can be found on the NCC website.

 

Source – National Cotton Council

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