US cotton industry faces 30% dip in export takings

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The US cotton industry faces a slump of nearly 30% in export earnings thanks to lower prices and weaker foreign demand, farm officials said, raising doubts over the significance of firm advance orders by China.

The US Department of Agriculture pegged US cotton exports at a four-year low of $4.8bn in fiscal 2012-13, which starts in October, tumbling from $6.7bn the year before.

The drop reflected in the main lower expectations for weaker sales prices, after a slide in New York cotton futures of some two thirds from the record 227 cents a pound, for a spot contract, reached in March last year.

“Unit value is expected to fall by nearly 25%, as cotton prices have fallen from the historic highs of the past two years,” the USDA said.

‘No longer stimulating import demand’

However, volumes were set to drop too, to 2.6m tonnes, the lowest in fiscal year terms since 2003, and reflecting lower shipments to China, the top importer of the fibre.

“[US] cotton exports are forecast down as the Chinese government’s reserve policy is no longer stimulating import demand to build stocks,” USDA officials said.

The comments come despite a firm start to the 2012-13 cotton marketing year for orders to China which., while below levels of the previous two seasons, are “third-highest in recent history”, on Morgan Stanley analysis.

“Already, China has demonstrated a willingness to continue importing from the US,” the bank said, in a report earlier this week forecasting that China may yet be set for a further round of cotton stockpiling, even after a more-than-doubling in inventories over the last year.

China vs Canada

The USDA said that weaker cotton exports to China would, with softer purchases of corn and soybeans too, return the country to second place among US trade partners in agriculture, behind Canada.

“Tighter U.S. exportable supplies and high prices for corn and soybeans are expected to lead to greater shipments to China by Brazil and Argentina.

“In addition, an improved Chinese corn crop should lower overall demand for imported corn.”

Source: http://www.agrimoney.com/news/us-cotton-industry-faces-30percent-dip-in-export-takings–4935.html

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