International Cotton Price Falls and Chinese Cotton Reserves Accumulating

Date Posted: 01 Nov, 2013
International cotton prices moved downward during October 2013, falling from 93 cents per pound at the start of the month to 85 cents per pound in the last few days. However, the 2013/14 average for the first three months of the season is 91 cents per pound, up by 10% from a year ago.
In 2013/14, production will exceed consumption by about 2 million tons of cotton, contributing to the fall in prices this month as recent harvesting data indicate that production in several major countries will be larger than originally expected. Since last month, world production has increased from 25.5 million tons to 25.7 million tons. Good weather during harvesting has increased yield, production and quality expectations in Greece and the United States, off-setting decreased production estimates in Uzbekistan. In Brazil, the area planted for cotton is expected to increase in 2013/14 compared to last season, and production is now forecast at 1.6 million tons, an increase of 22% compared to last season.
World ending stocks for 2013/14 are projected at 20.8 million tons with the majority, which is a 12% increase from last season. China is expected to hold 55% of the world ending stocks for 2013/14. On September 18, the China National Cotton Reserves Corporation started purchasing cotton, and as of October 31, it had purchased 903,230 tons of cotton, 74% of which is sourced from Xinjiang. This represents 51% of the planned quantity for this time period and is significantly less than the quantity of cotton purchased during the same time period last season. By the same date last year, procurement had already reached 1.6 million tons, which represented 58% of the planned quantity for September and October 2012.

  2012/13 2013/14 2014/15   2012/13 2013/14 2014/15
          Changes from previous month
  Million Tons   Million Tons
Production 26.91 25.73 25.16   0.04 0.19  
Consumption 23.36 23.68 24.60   -0.12 0.17  
Imports 9.84 8.59 7.93   -0.07 0.09  
Exports 10.03 8.59 7.93   -0.07 0.09  
Ending Stocks 18.59 20.76 21.32   0.32 0.46  
Cotlook A Index* 88 88          

* The price projection for 2013/14 is based on the ratio of ending stocks to mill use in the world-less-China in 2011/12 (estimate), 2012/13 (estimate) and 2013/14 (projection), and on the ratio of Chinese net imports to world imports in 2012/13 (estimate) and 2013/14 (projection). The price projection is the mid-point of the 95% confidence interval: 76 cts/lb to 103 cts/lb.

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