Record Stocks Held Outside China

Date Posted: 02 Mar, 2015
At the end of 2014/15, world ending stocks are projected up 11% to nearly 22 million tons. After increasing substantially in each of the three previous seasons, China’s ending stocks are expected to remain stable reaching just over 12 million tons in 2014/15, and would account for 56% of total world stocks.  Outside of China, ending stocks are forecast to increase for the second consecutive season from 7.5 million tons to 9.5 million tons, which is the largest volume of stocks in the last 35 years and is 60% of the expected mill use in 2014/15. While the gap between production and consumption has declined since 2011/12, production is projected to exceed consumption by 2.1 million tons in 2014/15 with most of the excess being held by producing countries with exportable surpluses.
 
Production in China is estimated down 7% to 6.4 million tons. While production has also fallen, the volume has been sufficient to meet 80 to 90% of demand, particularly as China’s consumption has declined the last four seasons. However, much of the domestic production was absorbed by China’s national reserve, and spinners relied heavily on imports from other producing countries, allowing international cotton prices to remain elevated. In 2014/15, China ended its reserve policy and in 2015 announced that it was limiting imports to the volume required under its WTO obligations. Turkey is the world’s third largest importer, but like China, imports are expected to decrease in 2014/15. Consumption in Turkey is forecast to fall 4% to 1.3 million tons as mills equipped with old machinery are shut down and cotton’s market share further declines as a result of the price attractiveness of synthetic fibers. At the same time, demand for imports is forecast to decrease by 13% to 761,000 tons due in part to an estimated 11% increase in domestic cotton lint production to 847,000 tons. Despite a 4% reduction in area this year and some losses from flooding, production in Pakistan is estimated up 11% at 2.3 million tons given the 15% increase in the average yield to 820 kg/ha. Imports by Pakistan are forecast to fall 9% to 367,000 tons as the current season’s crop will meet most of its need with imports mostly consisting of longer staple cotton that is not available from domestic producers.
 
As the world’s largest exporter, the United States is affected by the decline in China’s and Turkey’s imports, though demand for high quality machine-picked cotton will help to limit export losses. In 2014/15, production in the United States is estimated at 3.5 million tons, up 25% from 2013/14, and exports are forecast to increase modestly by 2% to 2.3 million. As a result, ending stocks in the United States are likely to increase 58% to just over 1 million tons. India, the second largest exporter is projected to experience a significant decrease in exports this season, despite a high volume of production estimated at 6.8 million tons. Consumption is forecast to increase 4% to 5.2 million tons while production remains stable, resulting in a smaller exportable surplus. Additionally, demand from China and Pakistan, two of its three largest buyers, has fallen. Ending stocks in India are expected to increase 40% to 2.4 million tons in 2014/15 after two season of contraction. 

WORLD COTTON SUPPLY AND DISTRIBUTION
               
  2013/14 2014/15 2015/16   2013/14 2014/15 2015/16
          Changes from previous month
  Million Tons   Million Tons
               
Production 26.28 26.36 24.41   0.00 0.09 -0.16
Consumption 23.50 24.22 24.66   0.00 -0.06 -0.03
Imports 8.74 7.40 7.81   0.00 -0.13 -0.03
Exports 8.86 7.4 7.81   0.00 -0.13 -0.03
Ending Stocks 19.53 21.67 21.41   0.00 0.15 0.02
               
Cotlook A Index* 91 68          
*The price projection for 2014/15 is based on the ending stocks/mill use ratio in the world-less-China in 2012/13 (estimate), in 2013/14 (estimate) and 2014/15 (projection), on the ratio of Chinese net imports to world imports in 2013/14 (estimate) and 2014/15 (projection). The price projection is the mid-point of the 95% confidence interval: 62 cts/lb to 76 cts/lb.


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