Stocks declining in China, increasing elsewhere

Date Posted: 01 Jun, 2018

In 2017/18, world cotton production is estimated at 26.6 million tonnes while world mill use is projected at 25.5 million tonnes, which represents the third consecutive season of growth in demand for cotton. China stocks are projected down to 9 million tonnes. Stocks held outside of China are projected up to 10.3 million tonnes, a continuous increase over the past four consecutive seasons. Along with weather issues in the Xinjiang region which represents 75% of China’s cotton area and potential drought conditions in West Texas affecting 25% of the US crop, there may be concern of quality supply gaps which may affect next seasons supply.

World cotton consumption is projected to increase to 26.7 million tonnes in 2018/19, while world cotton production is estimated at 25.7 million tonnes. Production in China is projected to decrease to 5.6 million tonnes in 2018/19 based on reduced planting area, while consumption is forecasted to increase to 8.4 million tonnes. US production is projected to decrease to 4.2 million tonnes with exports projected to increase 3% to 3.3 million tonnes in 2018/19. Reduced yields in 2017/18 in India are contributing to lowered planted area for 2018/19 with exports projected at 840,000 tonnes representing a 24% decrease from the previous season. Production in Brazil for the 2017/18 season is estimated to be 1.9 million tonnes, a 26% increase from 2016/17, with 900,000 tonnes projected for export. Production for the West Africa region in 2017/18 is projected at 1.2 million tonnes, representing a 13% growth from the previous season, with exports for the region expected at 1.04 million tonnes.
 


WORLD COTTON SUPPLY AND DISTRIBUTION
               
  2016/17 2017/18 2018/19   2016/17 2017/18 2018/19
          Changes from previous month
  Million Tons   Million Tons
               
Production 23.08 26.57 25.75   -0.02 0.59 0.07
Consumption 24.52 25.92 27.33   0.00 0.43 0.62
Imports 8.12 8.77 9.19   -0.01 0.07 -0.05
Exports 8.19 8.77 9.19   -0.01 0.07 -0.05
Ending Stocks 18.80 19.45 17.87   -0.03 0.14 -0.41
               
Cotlook A Index* 83 83* 81**        

* 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 10 months of 2017/18. The price projection is the mid-point of the 95% confidence interval: 82 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 102 cts/lb.



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