Global cotton production is forecast 8% higher in 2011/12, compared with 2010/11, at 26.8 million tons, yet consumption could decline by 2% to 23.9 million tons. As a result of the projected surplus of 2.9 million tons, global cotton stocks could climb to 11.9 million tons by the end of 2011/12, according to the International Cotton Advisory Committee (ICAC). This build up follows two seasons of relatively tight global stocks.
The lack of demand for cotton, combined with ample stocks globally, is placing downward pressure on cotton prices.
About 40% of the gain in global stocks this season could take place in China, due to the rebuilding of its national reserve. Between Oct. 8 and Dec. 30, 2011, a total of 2.1 million tons of domestic cotton were purchased for the China national reserve. Daily purchases are continuing. There is no set limit on the amount of domestic cotton that the national reserve can purchase this season. In addition, it is reported that about 1 million tons of non-Chinese cotton has been bought for the reserve. This cotton will be shipped to China over the next few months.
The national reserve, which was almost exhausted by the end of 2010/11, could grow by at least 3 million tons, or 11% of 2011/12 global production. It is possible that some of the reserve cotton will be sold later in the season. Outside of China, cotton stocks are expected to grow by 26% to 8.7 million tons in 2011/12, the highest amount in four years.