Cotton Stocks Continue to Drop
May 27, 2011 On April 8 (the latest reporting period), USDA’s U.S. cotton forecasts for 2010/11 showed lower production, higher domestic mill use and lower ending stocks.
At 1.6 million bales of ending inventory, the U.S. stocks-to-use ratio of 8% is at an historic low.
The production estimate was reduced 215,000 bales from last month based on USDA’s final Cotton Ginnings report released March 25, 2011.
Domestic mill use is raised 100,000 bales, reflecting recent activity. The export estimate is unchanged.
Dr. Gary Adams, an economist with the National Cotton Council said that he saw very few surprises in the report. “And don’t think the market saw any either, judging by the fairly quiet day,” he added. “We had already seen the ginnings report a few days ago.
“It took domestic use in the U.S. up about 200,000 bales, and I think that’s also consistent with what we’ve been seeing in the monthly pace of consumption,” he continued. “But all of this makes a tight balance sheet for the U.S. even tighter. It’s extremely tight at 1.6 million bales. It just reinforces that we’re basically sold out of old-crop cotton.”
Adams said it’s likely that U.S. mills have covered themselves from now until the new crop begins to arrive. “I would think that the vast majority of their needs have been taken care of,” he explained. “But it will be interesting to watch as we get towards the end of the marketing year. Some of the export sales could be rolled into the next year.”
The current marketing year ends on July 31.
World Ending Stocks Also Drop
USDA world cotton forecasts for 2010/11 include lower production and higher consumption, resulting in a 2% reduction in ending stocks.
World production was reduced by about 400,000 bales, based in decreases for the U.S., the African Franc Zone, Turkey and Pakistan. But the lower production numbers for those countries were partially offset by an increase for Brazil.
World consumption was raised, reflecting increases in Pakistan, the U.S. and others. It, too, was partially offset by a decrease in Brazil.
Revisions to world trade include lower exports by Brazil and the African Franc Zone, and lower imports by China and Pakistan. A forecast for world ending stocks of 41.55 million bales is the smallest stocks-to-use ratio since 1993/94.
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