Global cotton production to recover in 2016/17 while consumption remains stable

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Photo courtesy - Cargill

World cotton area is expected to expand by 1 to 31.3 million hectares in 2016/17, the International Cotton Advisory Committee (ICAC) said, as cotton planting began in northern hemisphere countries this month.

From December 2015 through February 2016, international cotton prices as measured by the Cotlook A Index averaged 69 cents/lb. However, prices for competing crops during the same period have fallen, making cotton more competitive this year compared to last, it said in its latest report.

According to the ICAC, world cotton production in 2016/17 is projected to increase by 4 percent, to just under 23 million tons, as the world average yield is anticipated to improve by 4 percent to 732 kg/ha. In 2016/17, India’s area is forecast up 4 percent to 12.4 million hectares due to improved domestic cotton prices in 2015/16.

Assuming yield is similar to the 4-year average of 522 kg/ha, production could reach 6.5 million tons in 2016/17. In March, the Chinese government announced a reduced target price for Xinjiang of 18,600 yuan/ton. As a result, area is likely to contract by 10% to 3.1 million hectares and production to decrease to 4.6 million tons.

Cotton area in the United States is projected to increase by 2 percent to 3.3 million hectares and production by 9 percent to 3.1 million tons. After production plummeted in 2015/16, cotton production in Pakistan is expected to jump 35 percent to 2.1 million tons as yields recover.

After declining by 2 percent in 2015/16, world cotton consumption is anticipated to remain stable at 23.9 million tons. Consumption in China is projected to decrease by 5% to 6.8 million tons due to increasing wages, high domestic cotton prices, and low polyester prices. In 2016/17, Vietnam’s cotton consumption is forecast to rise 16% to 1.3 million tons, making it the fifth largest consumer. Consumption in Bangladesh, the sixth largest, could increase by 10% to 1.2 million tons. After several seasons of growth, cotton mill use in India and Pakistan contracted in 2015/16 due to weaker demand. However, India’s consumption is projected to rise by 4% to 5.5 million tons, and in Pakistan by 1% to 2.2 million tons.

After declining by 3 percent in 2015/16, world cotton trade is expected to recover by 1% to 7.5 million tons in 2016/17, the ICAC said, as consumption grows in import dependent countries. Vietnam and Bangladesh are likely to be the two largest importers of cotton in 2016/17, with import volumes expected to rise by 25% to 1.4 million tons and by 5 percent to 1.1 million tons, respectively. China could see imports fall by 13 percent to 936,000 tons. Exports from the United States are projected to increase by 1 percent to 2.2 million tons while exports from India are forecast to decline by 13 percent to 1 million tons, it said.

In 2015/16, world ending stocks are expected to shrink by 8% to 20.3 million tons. The growth in cotton production while cotton consumption remains stable means that the reduction in stocks in 2016/17 will likely be smaller. World ending stocks are projected to fall by 5% to 19.4 million tons.

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