Higher global prices expected to trigger expansion in area under cotton – ICAC

georgia-cotton-6-b1.jpg

Cotton prices, which have remained high in 2017/18 at an average of 84.63 cents per pound, are expected to impact planting decisions to expand area under cotton for the 2018/19 season, the International Cotton Advisory Council (ICAC) said in a statement.

World area under cotton has averaged 32.4 million hectares over the last ten years and is projected to grow moderately during the next season.

Planted cotton area in the United states is expected to increase in 2018/19 by 11% to 5.08 million hectares after new support policies were announced in February, however drought conditions remain a concern for the cotton area in West Texas which represents approximately 25% of the US production.

“Planted area in India is expected to decrease to 11.9 million hectares in 2018/19. Chinese planted area is expected to remain stable based on the continuation of Chinese support policies,” the ICAC said.

According to the inter-governmental body, world cotton consumption is expected to continue to grow steadily through 2018/19 to a projected 26.7 million tons from 25.5 million tons estimated in 2017/18.

“Global imports are expected to increase to leading importers. Imports by China are projected to continue to increase for the fourth consecutive year to 1.5 million tons.”

While Chinese import figures continue to increase, Bangladesh remains the leading global importer, the ICAC pointed out, adding that the Chinese reserve auction to sell cotton stocks this year began in March and is expected to continue through September thus far releasing 30,000 tons per day for sale.

Daily sales through April have sold 100% of high quality Xinjiang quantities available, while lower grades have sold at 25% of available quantity. Import tariffs remain a potential concern in the global cotton trade.

“Despite lowered projections for 2017/18, the United States remains the leading global exporter and will likely remain so in the 2018/19 season with exports projected at 3.5 million tons,” the ICAC said in the statement.

WORLD COTTON SUPPLY AND DISTRIBUTION
               
  2015/16 2016/17 2017/18   2015/16 2016/17 2017/18
          Changes from previous month
  Million Tons   Million Tons
               
Production 23.09 25.97 25.68   0.00 0.30 0.34
Consumption 24.52 25.49 26.71   0.00 0.09 0.20
Imports 8.14 8.70 9.24   0.00 0.16 0.10
Exports 8.19 8.70 9.24   0.00 0.16 0.10
Ending Stocks 18.83 19.31 18.28   0.00 0.21 0.35
               
Cotlook A Index* 83 83* 82**        

* The price projection for 2017/18 is based on the ending stocks to mill use ratio in the world-less-China in 2015/16 (estimate), in 2016/17 (estimate) and in 2017/18 (projection), on the ratio of Chinese net imports to world imports in 2016/17 (estimate) and 2017/18 (projection), and on the average price for the first 6 months of 2017/18. The price projection is the mid-point of the 95% confidence interval: 78 cts/lb to 87 cts/lb.

**The price projection for 2018/19 is based on the ending stocks-to-mill use ratio in the world-less-China in 2016/17 (estimate), 2017/18 (projection) and 2018/19 (projection); on the ratio of Chinese net imports to world imports in 2017/18 (projection) and 2018/19 (projection); and on the price projection for 2017/18. The price projection is the mid-point of the 95% confidence interval: 63 cts/lb to 106 cts/lb.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

Share

Leave a Reply

Your email address will not be published. Required fields are marked *