A record crop in India will contribute to the global surplus and could further weaken cotton futures which have plunged 65% from the all time high of March 2011. China has intensified stockpiling of cotton to its state reserves raising the stock to 608,560 tons. The stock piling activty has entered the third year and is pushing up domestic prices of cotton for Chinese mills even as global prices are cheaper.
WASHINGTON/NEW DELHI (Commodity Online): Global cotton prices have weakened in October due to rising production reported in several major countries than originally expected, according to International Cotton Advisory Committee (ICAC). India has projected a record crop of 375 lakh bales (one bale of 170 kg) in season which began October 1, 2013.
A record crop in India will contribute to the global surplus and could further weaken cotton futures which have plunged 65% from the all time high of March 2011. A large quantity of Indian production is expected to be exported to China as good rains in Gujarat and Maharashtra will push up production this year.
China has intensified stockpiling of cotton to its state reserves raising the stock to 608,560 tons. The stock piling activty has entered the third year and is pushing up domestic prices of cotton for Chinese mills even as global prices are cheaper.
In the week ended, November 1, China’s domestic cotton purchases reached the highest weekly volume so far this year.
Meanwhile, ICAC in its market review said that 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.
Source: Commodity Online