High prices persist despite rising stocks outside of China
Sales from China’s reserve through May 2017 reached over 1.1 million tons, which brings the total volume of cotton held by the Chinese government to 7.2 million tons. China’s cotton production declined by 2% to 4.9 million tons in 2016/17, but its mill use is projected to increase by 2% to 7.7 million tons. Imports by China are anticipated to increase by 10% to 1.06 million tons, which is the first increase since 2011/12, though any further increase is limited by the import quota. Thus, sales from the reserve are being used to make up for the shortfall in production while mill use is forecast to remain unchanged at 7.7 million tons in 2017/18.
Production outside of China is estimated up by 10% to 18 million tons in 2016/17 and is expected to grow by 5% to 19 million tons in 2017/18 due to the high prices prevailing this season. Cotton area in India is forecast to expand by 7% to 11.3 million hectares, and assuming yield is similar to the 4-year average of 528 kg/ha, production could increase by 3% to 6 million tons in 2017/18.
Pakistan’s cotton production is projected to increase by 13, and if high prices continue through the end of 2017, cotton production in Brazil could increase to 1.5 million tons.
In 2017/18, world trade is expected to remain unchanged from 2016/17 at 8.1 million tons. Given that cotton production is projected to grow in the large consuming countries the need to import cotton will likely decrease.
After falling by 1% to 16.5 million tons in 2016/17, mill use outside of China may increase by 2% to 16.9 million tons in 2017/18 due to much stronger growth in the global economy in 2017 and 2018. Consumption in India is forecast to increase by 3% to 5.2 million tons in 2017/18 as prices for cotton and yarn are likely to be competitive due to the increase in supply. Pakistan’s mill use is expected to rise modestly by 1% to 2.3 million tons as competition from other mills in Asia remains stiff. Consumption in Bangladesh is projected to rise by 5% to 1.5 million tons while Turkey’s mill use is expected to decline by 15,000 tons to 1.4 million tons due to completion from other countries and weak domestic demand.