2016/17 Will be Second Consecutive Season of Consumption Exceeding Production

Date Posted: 01 Sep, 2016
World ending stocks are estimated to have fallen by 13% to 19.5 million tons in 2015/16 as global demand outpaced production. In 2016/17, world cotton consumption is expected to exceed world cotton production by 1.4 million tons, which would bring ending stocks to 18.1 million tons, down 7% from 2015/16. Unlike in 2015/16, when an 11% decrease occurred, ending stocks outside of China are forecast to increase by 1% to 8.3 million tons, though the stock-to-use ratio would remain unchanged. However, ending stocks in China are expected to decrease by 13% to 9.9 million tons in 2016/17 as the government continues to dispose of its reserves. By the end of August, the Chinese government sold 2 million tons from its national reserve, bringing the volume held by the government down to a little over 9 million tons.
 
World cotton production is projected to increase by 6% to 22.5 million tons. Better prices for competing crops, the late arrival of the monsoon and yield losses from pest pressure last season discouraged farmers in India, the world’s largest producer of cotton, and the planted area is projected to fall by 6% to 11.2 million hectares. Sufficient rains should boost the national average yield by 8% to 521 kg/ha, and production is forecast to increase by 2% to 5.8 million tons. The area under cotton in China is projected to contract by 7% to 2.9 million hectares in 2016/17, but the national average yield is expected to improve by 4% to 1,623 kg/ha due to generally favorable weather during the growing season. China’s production is forecast to fall by 3% to 4.7 million tons. The cotton area in the United States is expected to rebound by 10% to 3.6 million hectares, and the average yield is anticipated to increase by 8% to 929 kg/ha due to beneficial weather and plentiful rainfall. As a result, production is forecast to grow by 19% to 3.3 million tons. Losses from poor yields in 2015/16 and weak prices discouraged farmers in Pakistan from planting cotton in 2016/17, and area under cotton is projected to decrease by 5% to 2.7 million hectares. However, the national average yield is expected to rebound by 27% to 669 kg/ha, and production could increase by 20% to 1.8 million tons. Improved weather this summer encouraged farmers in Francophone Africa to expand cotton plantings by 10% to 2.9 million hectares, and the average yield is forecast to increase by 4% to 385 kg/ha. As a result, production in Francophone Africa is projected to grow by 14% to 1.1 million tons.
 
World cotton consumption is forecast to remain stable at 23.8 million tons. China will likely be the largest consumer in 2016/17 despite an expected decrease in mill use of 3% to 7.1 million tons, which would be the seventh consecutive season of contraction. India’s mill use is expected to remain stable at 5.3 million tons due to strong domestic cotton prices and competition from competing fibers. After declining by 9% in 2015/16, cotton mill use in Pakistan could recover by 1% to 2.3 million tons due to improved access to uninterrupted energy supplies. Turkey’s consumption is forecast to remain stable at 1.45 million tons, while Bangladesh’s mill use is projected to rise by 12% to 1.2 million tons.
 
Stable demand and larger crops in many of the top exporting countries are expected to lead to an increase in world trade volume of 3% to 7.5 million tons. Imports by Bangladesh are projected to increase by 12% to 1.2 million tons, making it the world’s largest importer. Vietnam’s imports are forecast to grow by 12% to 1.1 million tons. After four seasons of contraction, imports by China could increase by 20,000 tons to 980,000 tons in 2016/17 as consumption remains much larger than production. Exports from the United States are anticipated to rise by 27% to 2.5 million tons. Meanwhile, stable mill use and a smaller crop are likely to lead to a 32% decrease in Indian exports, which are expected to reach 846,000 tons. 


WORLD COTTON SUPPLY AND DISTRIBUTION
               
  2014/15 2015/16 2016/17   2014/15 2015/16 2016/17
          Changes from previous month
  Million Tons   Million Tons
               
Production 26.19 21.19 22.45   0.07 -0.07 -0.44
Consumption 24.20 23.85 23.81   0.02 0.00 -0.12
Imports 7.57 7.21 7.49   -0.01 -0.04 -0.05
Exports 7.72 7.36 7.49   0.00 0.05 -0.05
Ending Stocks 22.32 19.50 18.14   0.00 -0.17 -0.49
               
Cotlook A Index* 71 70 75        

* The price projection for 2016/17 is based on the ending stocks/consumption ratio in the world-less-China in 2014/15 (estimate), in 2015/16 (estimate) and in 2016/17 (projection), on the ratio of Chinese net imports to world imports in 2015/16 (estimate) and 2016/17 (projection). The price projection is the mid-point of the 95% confidence interval: 62 cts/lb to 91 cts/lb.

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