ICAC Projects Record Cotton Stocks Outside of China
March 3, 2015 Market analysts with the International Cotton Advisory Committee are projecting world ending stocks to grow 11 percent to nearly 22 million tons by the end of the 2014/15 marketing year.
After increasing substantially in each of the three previous seasons, ICAC believes that China’s ending stocks will remain stable, reaching just over 12 million tons in 2014/15 and accounting for 56 percent of total world stocks. Outside of China, ending stocks are forecast to increase for the second consecutive season, from 7.5 million tons to 9.5 million tons – marking the largest volume of stocks in the last 35 years and 60 percent of the expected mill use in 2014/15.
While the gap between production and consumption has declined since 2011/12, production is projected to exceed consumption by 2.1 million tons in 2014/15, with most of the excess being held by producing countries with exportable surpluses.
Production in China is estimated down seven percent to 6.4 million tons. While production has also fallen, the volume has been sufficient to meet 80 to 90 percent of demand, particularly as China’s consumption has declined the last four seasons. However, much of the domestic production was absorbed by China’s national reserve, and spinners relied heavily on imports from other producing countries, allowing international cotton prices to remain elevated.
In 2014/15, China ended its reserve policy and, in 2015, announced that it was limiting imports to the volume required under its WTO obligations.
Turkey is the world’s third largest importer. But like China, imports are expected to decrease in 2014/15. Consumption in Turkey is forecast to fall four percent to 1.3 million tons, as mills equipped with old machinery are shut down and cotton’s market share further declines as a result of the price attractiveness of synthetic fibers. At the same time, demand for imports is forecast to decrease by 13 percent to 761,000 tons, due in part to an estimated 11 percent increase in domestic cotton lint production to 847,000 tons.
Despite a four percent reduction in area this year and some losses from flooding, production in Pakistan is estimated up 11 percent at 2.3 million tons, given the 15 percent increase in the average yield to 820 kg/ha. Imports by Pakistan are forecast to fall nine percent to 367,000 tons, as the current season’s crop will meet most of its need and imports mostly consisting of longer staple cotton that is not available from domestic producers.
As the world’s largest exporter, the United States is affected by the import declines in China and Turkey, although demand for high quality, machine-picked cotton will help to limit export losses. In 2014/15, production in the United States is estimated at 3.5 million tons, up 25 percent from 2013/14. Exports are forecast to increase modestly by two percent to 2.3 million. As a result, ending stocks in the United States are likely to increase 58 percent to just over one million tons.
India, the second largest exporter is projected to experience a significant decrease in exports this season, despite a high volume of production estimated at 6.8 million tons. Consumption is forecast to increase four percent to 5.2 million tons while production remains stable, resulting in a smaller exportable surplus. Additionally, demand from China and Pakistan – two of the country’s three largest buyers – has fallen.
Ending stocks in India are expected to increase 40 percent to 2.4 million tons in 2014/15 after two seasons of contraction.
Source – International Cotton Advisory Committee
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