Survey: U.S. Cotton Stocks Could Reach Six-Year Low

U.S. cotton inventories may fall to the lowest in six years by July 2010 as demand from domestic and overseas mills tops output, a Bloomberg News survey shows.

U.S. stockpiles at the end of the year that starts Aug. 1 may reach 4.4 million bales, the average of 11 estimates in the survey. That would compare with the average estimate of 6.79 million bales for the current marketing year and would be the lowest since July 2004, U.S. Department of Agriculture data show.

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“Ending stocks are likely to tumble for the second straight year,” Gary Raines, an economist for FCStone in Nashville, Tennessee, said in an e-mail. Analysts, traders and economists were included in the Bloomberg survey.

The first USDA estimate for cotton production and demand for the 2009-2010 marketing year is scheduled for release on May 12 in Washington. At the same time, the department also will update figures for the current marketing year.
U.S. output may reach 12.85 million bales next season, close to the average 12.77 million bales projected by survey respondents for this year’s harvest. U.S. exports may reach 12.27 million bales, compared to 12.43 million this year, the average projections show.

Last month, the USDA forecast output of 12.83 million bales in the current year and exports of 12.5 million bales. The U.S. is the world’s largest cotton exporter, USDA has said. The agency said stockpiles would fall to 6.7 million bales on July 31.

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Global Output, Demand

“Looking ahead to 2009-2010, we expect U.S. and global fundamentals to diverge, with demand for U.S. cotton outpacing supply, while world supplies are again expected to outpace global mill demand,” Raines said.

Worldwide ending stocks may increase to 64.3 million bales next year from 63.9 million this year, Raines said. He estimates production of 107 million bales and consumption of 106.1 million bales. Each bale weighs 480 pounds (218 kilograms).

Other analysts expect cotton consumption to rebound as the global economy recovers, and production to fall as farmers use less land to grow the fiber. Last month, the USDA projected worldwide consumption of 109.8 million bales this year, above production of 108.34 million bales.

Global production will reach 108.8 million bales next year, said Sharon Johnson, a First Capitol Group senior cotton analyst in Atlanta. She said consumption will be 113 million bales.

Cotton futures for July delivery rose 0.97 cent, or 1.6 %, to 59.85 cents a pound on ICE Futures U.S. in New York on May 8. Earlier in the session, the price reached 59.97 cents, the highest for a most-active contract since Sept. 29. The most- active contract has risen 22 % this year.

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