Low cotton prices are expected to persist through the rest of 2014/15 when farmers in the Northern Hemisphere make their planting decisions. As a result, world cotton area in 2015/16 is projected down six percent to 31.6 million hectares. Assuming a world average yield of 777 kg/ha, world cotton production is forecast to fall six percent to 24.6 million tons, which is the lowest volume since 2009/10.
At the same time, world cotton consumption is expected to increase by two percent to 24.7 million tons, making 2015/16 the first time in five seasons where consumption overtakes production. Although consumption could surpass production by about 100,000 tons, this would only be a small dent in the large stockpile of cotton. In 2015/16, cotton is likely to be much less attractive to plant due to falling cotton prices, while prices for competing crops such as maize and soy have recovered from price downturns last September and October.
Although the Indian government raised its minimum support price in 2014/15, the price was still too low compared to production costs for many farmers, and area in India is forecast down five percent to 11.6 million hectares. Assuming yield is similar to the last few seasons, production could reach 6.5 million tons, making India the largest producer of cotton for the second consecutive season.
In China, area is projected to fall for the fourth consecutive season by 10 percent to 3.8 million hectares, and production is forecast down 11 percent to 5.7 million tons – the lowest level since 2003/04.
In the United States, uncertainty over returns under the new STAX program and low cotton prices relative to competing crops may make farmers less enthusiastic to plant cotton this season. Area in the United States is expected to contract 10 percent to 3.6 million hectares, and production will decline seven percent to 3.3 million tons in 2015/16.
Low prices in Pakistan and the slow start to procurement by the Trading Corporation of Pakistan prompted many farmers to end cotton harvesting early to plant wheat instead. The lack of enthusiasm for cotton is likely to persist into planting time for 2015/16. Area in Pakistan is expected to fall by five percent to 2.7 million hectares, and production by nine percent to 2.2 million tons. World cotton consumption is forecast to grow by two percent in 2015/16 due to a moderate improvement in global economic growth of 3.5 percent as forecast by the International Monetary Fund. However, prices for polyester have also fallen much faster than cotton prices for much of the season, eroding the price attractiveness of cotton.
Consumption in China is forecast to remain stable at around eight million tons, accounting for nearly one third of world consumption. High domestic cotton prices, rising labor costs and the availability of cheap yarn imports in China have hurt its spinning sector, and the expansion of the spinning industry to other countries in Asia should continue to grow.
In 2015/16, consumption in India, projected at 5.3 million tons and in Pakistan, at 2.4 million tons, will account for nearly a third of world cotton consumption. Bangladesh, Indonesia and Vietnam are projected to represent 10 percent of all lint consumption in 2015/16.
World cotton trade is expected to rise four percent to 7.9 million tons due to a partial recovery in consumption, particularly in countries that rely on imports in 2015/16.
Source – International Cotton Advisory Committee