Cotton Production to Recover in 2016/17 While Consumption Remains Stable

Date Posted: 01 Apr, 2016
Cotton planting in Northern Hemisphere countries commences this month. In 2016/17, world cotton area is expected to expand by 1% to 31.3 million hectares. From December 2015 through February 2016, international cotton prices as measured by the Cotlook A Index averaged 69 cents/lb. However, prices for competing crops during the same period have fallen, making cotton more competitive this year compared to last. World cotton production in 2016/17 is projected to increase by 4%, to just under 23 million tons, as the world average yield is anticipated to improve by 4% to 732 kg/ha. In 2016/17, India’s area is forecast up 4% to 12.4 million hectares due to improved domestic cotton prices in 2015/16. Assuming yield is similar to the 4-year average of 522 kg/ha, production could reach 6.5 million tons in 2016/17. In March, the Chinese government announced a reduced target price for Xinjiang of 18600 yuan/ton. As a result, area is likely to contract by 10% to 3.1 million hectares and production to decrease to 4.6 million tons. Cotton area in the United States is projected to increase by 2% to 3.3 million hectares and production by 9% to 3.1 million tons. After production plummeted in 2015/16, cotton production in Pakistan is expected to jump 35% to 2.1 million tons as yields recover.
After declining by 2% in 2015/16, world cotton consumption is anticipated to remain stable at 23.9 million tons. Consumption in China is projected to decrease by 5% to 6.8 million tons due to increasing wages, high domestic cotton prices, and low polyester prices. In 2016/17, Vietnam’s cotton consumption is forecast to rise 16% to 1.3 million tons, making it the fifth largest consumer. Consumption in Bangladesh, the sixth largest, could increase by 10% to 1.2 million tons. After several seasons of growth, cotton mill use in India and Pakistan contracted in 2015/16 due to weaker demand. However, India’s consumption is projected to rise by 4% to 5.5 million tons, and in Pakistan by 1% to 2.2 million tons.
After declining by 3% in 2015/16, world cotton trade is expected to recover by 1% to 7.5 million tons in 2016/17, as consumption grows in import dependent countries. Vietnam and Bangladesh are likely to be the two largest importers of cotton in 2016/17, with import volumes expected to rise by 25% to 1.4 million tons and by 5% to 1.1 million tons, respectively. China could see imports fall by 13% to 936,000 tons. Exports from the United States are projected to increase by 1% to 2.2 million tons while exports from India are forecast to decline by 13% to 1 million tons.
In 2015/16, world ending stocks are expected to shrink by 8% to 20.3 million tons. The growth in cotton production while cotton consumption remains stable means that the reduction in stocks in 2016/17 will likely be smaller. World ending stocks are projected to fall by 5% to 19.4 million tons. 

  2014/15 2015/16 2016/17   2014/15 2015/16 2016/17
          Changes from previous month
  Million Tons   Million Tons
Production 26.11 22.03 22.95   0.00 -0.16 -0.05
Consumption 24.34 23.80 23.89   0.02 -0.06 -0.06
Imports 7.60 7.40 7.49   0.00 0.00 -0.10
Exports 7.70 7.40 7.49   0.00 0.00 -0.10
Ending Stocks 22.10 20.33 19.39   -0.02 -0.13 -0.11
Cotlook A Index* 71 70 72        

* The price projection for 2015/16 is based on the ending stocks/consumption ratio in the world-less-China in 2013/14 (estimate), in 2014/15 (estimate) and in 2015/16 (projection), on the ratio of Chinese net imports to world imports in 2014/15 (estimate) and 2015/16 (projection). The price projection is the mid-point of the 95% confidence interval: 66 cts/lb to 76 cts/lb.
* 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 (projection) and in 2016/17 (projection), on the ratio of Chinese net imports to world imports in 2015/16 (projection) and 2016/17 (projection). The price projection is the mid-point of the 95% confidence interval: 58 cts/lb to 89 cts/lb.

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