After international cotton prices spiked in 2010/11, many spinners decreased the share of cotton in yarn in favor of greater use of polyester. At the start of 2013, the gap between cotton and polyester prices widened. Polyester prices remained fairly stable at around 74-76 cts/lb for most of 2013 and 2014 until dropping to 65 cts/lb in April of this year. During the same period, international cotton prices climbed higher, reaching 99 cts/lb at their peak. However, the situation changed significantly in July 2014, with the Cotlook A index falling to 80 cts/lb while polyester has climbed back up to around 73 cts/lb. Furthermore, the price of cotton in China has also fallen from around 141 cts/lb during most of 2013/14 to around 126 cts/lb in the last few weeks. With polyester and cotton prices converging, world consumption of cotton is forecast to increase by 5% to 24.5 million tons in 2014/15. Consumption in Asia is expected to grow strongly in 2014/15, led by China’s 5% increase to 7.9 million tons. India’s consumption could grow by 6% to 5.4 million tons. The rest of Asia is projected to expand by 8% to nearly 2.4 million tons.
World production in 2014/15 is forecast to be 25.5 million tons, down from 26.1 million tons in 2013/14. Although the monsoon has arrived in India, the volume of precipitation has varied widely and yield is likely to suffer in some places. India’s production is expected to be just over 6 million tons in 2014/15. On the other hand, China, whose average yield is nearly three times higher than India’s, is expected to produce around 6.2 million tons. The United States has experienced abundant rains this season, and its production is projected to grow to nearly 3.5 million tons.
Trade is forecast to decline by to 7.9 million tons in 2014/15, driven mainly by a 26% fall in imports by China to 2.2 million tons. India’s exports are likely to fall to 800,000 tons, which would be less than half of its exports in 2013/14. Exports from the United States are forecast to rise by 9% to 2.5 million tons in 2014/15.
The Chinese government will close out 2013/14 having sold around 2.3 million tons of cotton, which is 37% of the 6.3 million tons purchased this season. As this is the second successive year in which total purchases by the government exceeded sales, government stocks have increased again and are estimated to hold 11.4 million tons. China’s total ending stocks are around 11.9 million tons. World stocks outside China are up by 6% to 8.6 million tons. This is the largest volume of world ending stocks outside China since 2007/08, when they reached 8.8 million tons, and is weighing heavily on prices for 2014/15.
WORLD COTTON SUPPLY AND DISTRIBUTION |
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2012/13 |
2013/14 |
2014/15 |
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2012/13 |
2013/14 |
2014/15 |
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Changes from previous month |
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Million Tons |
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Million Tons |
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Production |
26.68 |
26.13 |
25.53 |
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0.00 |
0.32 |
0.22 |
Consumption |
23.31 |
23.29 |
24.5 |
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0.02 |
-0.06 |
0.36 |
Imports |
9.87 |
8.98 |
7.93 |
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0.04 |
0.21 |
-0.21 |
Exports |
10.09 |
8.98 |
7.93 |
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0.04 |
0.21 |
-0.21 |
Ending Stocks |
17.75 |
20.60 |
21.69 |
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0.01 |
0.40 |
0.19 |
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Cotlook A Index* |
88 |
91 |
85* |
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*The price projection for 2014/15 is based on the ending stocks/mill use ratio in the world-less-China in 2012/13 (estimate), in 2013/14 (estimate) and 2014/15 (projection), on the ratio of Chinese net imports to world imports in 2014/15 (projection), and on the price projection for 2013/14. The price projection is the mid-point of the 95% confidence interval: 69 cts/lb to 103 cts/lb.