Global cotton production seen higher, but stocks to decline – USDA

The United States Department of Agriculture’s (USDA) first detailed forecasts for the 2016/17 marketing year indicate substantially higher cotton production, alongside a more muted increase in consumption, but still yielding the second consecutive year of declining global stocks.

Nearly the entire decline in stocks is forecast to occur within China, as reserve sales in the upcoming year and recovering mill use lead to a 6.6-million-bale reduction in stocks, its latest world agriculture supply and demand report forecast.

Outside of China, stocks are expected to rise slightly after a year when stocks in many major exporters, other than the United States and Australia, have become very tight. Global trade, meanwhile, is expected to slacken slightly as Pakistan’s production recovers and China’s reserve sales continue, while growth in major importers such as Vietnam and Bangladesh slows slightly, it said.

The recovery in consumption is based on continued growth in Vietnam and Bangladesh and a resumption of growth in China. Ongoing reserve sales and the continuation of current domestic support policies for cotton will allow lint prices within China to remain well below the high levels seen in recent years.

Meanwhile, slower growth in other major consuming countries is a corollary of faster growth in China, as Vietnam in particular is expected to spin less yarn for export to China in 2016/17. On the production side, the extraordinarily poor conditions which reduced yields in Pakistan, parts of India, and the southeastern United States are not expected in 2016/17, the report added.

It said production in smaller producers, such as Egypt, Turkmenistan, Turkey, and some West African countries, is forecast under more favourable conditions and up from 2015/16. This higher forecast production, alongside supplies made available from China’s state reserve, is expected to pressure world cotton prices in 2016/17 and therefore enable more yarn spinning.

Overview for 2016/17

  • Production is forecast up substantially on recovering yields. Consumption is forecast up moderately, especially in China.
  • Trade is forecast down as production recovers in major 2015/16 importers such as Pakistan. U.S. production is forecast to rise on higher yields, leading to substantially higher exports as well.
  • The U.S. season-average farm price is forecast down 1 cent from the 2015/16 forecast to 57 cents/pound. For 2015/16, world production is lowered slightly.
  • Global consumption is lowered significantly, especially in Asian countries such as Vietnam and Taiwan, partially offset by an increase in Turkey.
  • Global trade is down due to sharply lower imports by China and Vietnam, partially offset by higher imports in Pakistan and Turkey. U.S. exports are reduced 500,000 bales to 9.0 million, while production is revised marginally upwards. The U.S. season-average farm price is lowered by half a cent to 58 cents/pound.

Trade outlook 2015/16

Major Importers:

  • China is slashed 750,000 bales to 4.3 million on weak import demand and strong reserve sales.
  • Vietnam is dropped 400,000 bales to 4.8 million on slowing recent shipments and weaker yarn demand from China.
  • Pakistan is hiked 200,000 bales to 10.3 million on continuing robust shipments from India.
  • Turkey is boosted 150,000 bales to 3.9 million on a record-setting month of imports.
  • Taiwan is lowered 125,000 bales to 750,000 on weak nearby demand.
  • Indonesia is raised 100,000 bales to 2.8 million on higher recent import activity.

Major Exporters:

  • United States is cut 500,000 bales to 9.0 million on weak recent sales.
  • Turkmenistan is up 200,000 bales to 1.2 million on continuing strong sales.
  • Australia is lowered 150,000 bales to 2.6 million on the pace of trade to date.
  • Uzbekistan is lowered 100,000 bales to 2.2 million on the pace of trade to date.

 

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