World Cotton Prices Rise as Stocks Tighten - ICAC

MUMBAI (Commoditiescontrol) - International cotton prices jumped to over 80 cents/lb in the second half of July 2016 from an average of 70 cents/lb for the rest of the season. Significantly lower crops in the five largest producing countries and higher than expected demand led to tighter stocks at the end of 2015-16, at which time world ending stocks were estimated to have fallen by 12 percent to 19.7 million tonnes. Stocks outside of China decreased by 9 percent, to 8.4 million tonnes, which is the lowest level since 2010-11, when they reached 8.3 million tonnes. Furthermore, strong demand in China has reduced its national stocks by 12 percent, to 11.3 million tonnes.

Demand for cotton from the Chinese government’s reserve has been strong since auctions started in May 2016. On average, 26,000 tonnes of cotton have been offered daily, nearly all of which has been sold and total sales through the end of July are around 1.6 million tonnes, reducing China’s national reserve to 9.4 million tonnes. In 2015-16, China’s cotton production declined by 26 percent to 4.8 million tonnes, but cotton mill use in China decreased by 2 percent to 7.3 million tonnes, exceeding production by 2.5 million tonnes. Import quotas limited the total volume of imports to 940,000 tonnes in 2015-16, and sales from the reserve were used to meet the excess demand.

World cotton demand declined by 1 percent to 23.9 million tonnes in 2015-16, but world production decreased by 18 percent to 21.3 million tonnes, contributing to the tight supply situation at the end of the season. Declines in production occurred in the top five producers, which account for 76 percent of world output. India, the world’s largest cotton producer, saw its production fall by 11 percent to 5.7 million tonnes in 2015-16. As noted above, China’s production declined to 4.8 million tonnes, while output in the United States decreased by 21 percent to 2.8 million tonnes. Yields in Pakistan fell to their lowest level since 1998/99, resulting in a 34 percent drop in production to 1.5 million tonnes. Output in Brazil declined by 11 percent, to 1.4 million tonnes. In 2016-17, world production is predicted to increase by 8 percent, to 22.9 million tonnes. Gains in India, the United States, Pakistan and Brazil will offset the loss of production in China in 2016-17. Better cotton prices during the growing season will encourage farmers to use more inputs, such as fertilizer, in order to improve yields and take advantage of higher prices. In addition, weather has generally been more favorable this summer than in 2015.

Although world production is expected to increase in 2016-17, consumption is projected to remain stable at 23.9 million tonnes. Mill use in China, the world’s largest consumer, is forecast to decrease by 3 percent, to 7.1 million tonnes, due to high cotton prices, low polyester prices, and limited imports. However, mill use may stage a modest recovery in India and Pakistan, where consumption is projected to increase by 2 percent, to 5.3 million tonnes, and by 1 percent, to 2.2 million tonnes, respectively.

World imports are forecast to increase by 4 percent, to 7.5 million tonnes, as mill use continues to grow in countries that rely on imports. Shipments received by the world’s two largest importers, Vietnam and Bangladesh, are expected to rise by 19 percent, to 1.26 million tonnes, and 18 percent, to 1.21 million tonnes, respectively.



(By Commoditiescontrol Bureau; +91-22-40015533)