Global Cotton Ending Stocks Lower in 2015/16
The latest U.S. Department of Agriculture (USDA) projections for 2015/16 indicate that global cotton stocks are expected to decrease for the first time since 2009/10 as mill use exceeds production. World ending stocks are projected at 106.1 million bales for 2015/16, 3.5 percent (3.9 million bales) below 2014/15.
Global cotton stocks have risen dramatically over the last several seasons, largely the result of growth in China’s stocks (fig. 1). Government policies in China supported national reserve purchases of domestic cotton and, at the same time, significant raw cotton imports; these policies strengthened global cotton prices by keeping China’s supplies out of the marketplace and encouraged production in other foreign countries. Stocks in China at the end of 2014/15 are estimated at a record 65.6 million bales, or 60 percent of global stocks. For 2015/16, policy adjustments in China are expected to reduce stocks—but only slightly—to 62.6 million bales, with its share of world stocks remaining mostly unchanged.
USDA’s 2015 U.S. cotton crop projection remains at 14.5 million bales this month and is 11 percent below the final 2014 crop. While the Southwest precipitation that occurred in May was generally beneficial, uncertainty remains as to its effect on area and yield as planting was delayed and is still in progress.
The planting estimate of 9.55 million acres will be updated in USDA’s Acreage report, which will be released June 30th. This report will include actual plantings as of early June, as well as estimates for any remaining cotton to be planted. As of June 7th, 81 percent of the expected cotton area had been planted, below last season’s 87 percent and the 2010-14 average of 89 percent. Crop development has followed similarly, with 7 percent of the cotton area squaring by June 7th, compared with 8 percent last season and a 5-year average of 10 percent.
Based on current projections, U.S. cotton harvested area is forecast at 8.6 million acres for 2015, reflecting a below-average abandonment rate of 10 percent. Last season’s abandonment rate was 15 percent. The 2015 U.S. cotton yield is forecast at 809 pounds per harvested acre, compared with 838 pounds per harvested acre in 2014. USDA’s National Agricultural Statistics Service will begin “in field” production surveys in August.
Demand, Stocks, and Price Range for 2015/16 Unchanged
U.S. cotton demand for 2015/16 remains projected at 14.5 million bales, slightly above the previous season’s estimate. Exports account for 10.7 million bales while mill use contributes the remaining 3.8 million bales. With expected U.S. supplies and world import demand similar to a year earlier, U.S. cotton exports are also forecast at the same level. As a result, the U.S. share of world trade is projected at about 32 percent for 2015/16, slightly above 2014/15 and the highest in 5 seasons. U.S. cotton mill use is forecast to rise 4 percent in 2015/16, the highest since 2010/11; the U.S. textile industry has realized additional capacity and is expected to remain very competitive in 2015/16, pushing cotton mill use growth above the world average.
Based on these supply and demand estimates, U.S. cotton ending stocks for 2015/16 remain projected at 4.4 million bales, unchanged from the beginning level but the highest since 2008/09. The implied stocks-to-use ratio is estimated at 30 percent, marginally below 2014/15. The forecast for the 2015/16 U.S. average farm price is projected to range between 50 and 70 cents per pound, with the midpoint of this range slightly below 2014/15’s revised estimate of 60.5 cents per pound.
Global 2015/16 cotton production is projected to decline 6 percent from the previous season to 111.3 million bales. Lower crops are forecast for most major cotton-producing countries in 2015/16, with India and Uzbekistan production level with 2014/15. India—expected to be the leading producer in 2015/16—is forecast to produce 29.5 million bales, or 26.5 percent of global cotton production. Lower area and higher yields, compared with 2014/15, are expected to keep production in India unchanged.
China’s production is projected to decrease 10 percent in 2015/16 to 27 million bales as area continues to trend lower; China’s area is expected to be only 3.7 million hectares in 2015/16, 16 percent below 2014/15. The national yield, however, is projected to rise to a record as area continues to shift to the higher yielding Xinjiang region. Production for Pakistan in 2015/16 is forecast at 10 million bales, about 6 percent below the previous year with a return to normal yields. Brazil’s crop is expected to approach 6.8 million bales, nearly 4 percent lower as both area and yield are projected below 2014/15.
World area harvested in 2015/16 is forecast at 31.8 million hectares, 2 million hectares (6 percent) below the previous season. The global cotton yield is forecast at 763 kg/hectare in 2015/16, slightly below 2014/15.
Global Cotton Mill Use to Increase in 2015/16; Trade Reduced
World cotton mill use is forecast at 115.3 million bales, 3 percent higher than the 111.5 million bales expected to be consumed in 2014/15, as lower cotton prices and economic growth stimulate demand. If realized, mill use would be the highest since 2010/11’s 115.6 million bales. China and India remain the largest consuming countries, with a combined cotton mill use of about 62 million bales, or more than 53 percent of the global total.
China’s cotton consumption is projected at 36 million bales in 2015/16, up from 35 million bales but equal to 2012/13. China’s mill use is expected to benefit from domestic prices that are more in line with world prices; however, mill use growth of about 3 percent may be constrained by cotton yarn imports as in previous years. In 2014/15, China is likely to import more than 9.5 million bale-equivalents of cotton yarn. Pakistan, India, and Vietnam are the leading suppliers of cotton yarn to China and will account for over 80 percent of the total in 2014/15 (fig. 2).
Mill use in India is projected at nearly 25.8 million bales, 5 percent above 2014/15 and a record; India’s growth is being supported in part by expanding textile product exports. Pakistan’s cotton mill use is also expected to expand to near the global average in 2015/16, reaching 11.1 million bales. In addition to gains in the United States, cotton mill consumption is also expected to increase in Turkey, Bangladesh, and Vietnam.
Global cotton trade, in contrast, is forecast to reach only 33.8 million bales in 2015/16, 400,000 bales below a year earlier and the lowest since 2008/09, when only 30 million bales were traded. The recent downward trend is the result of
China’s raw cotton import demand, which is projected to decline for the fourth consecutive season in 2015/16. China is expected to import only 6 million bales in 2015/16, compared with an estimated 8 million bales in 2014/15, due to an expected decline in import quotas. Offsetting a portion of China’s decline are increases for a number of countries, including Vietnam, Turkey, and Indonesia. Meanwhile, exports in 2014/15 are expected to decrease mainly from the Southern Hemisphere, most notably Brazil and Australia, where exports are currently forecast at 3.6 million bales and 2 million bales, respectively, in 2015/16.
Global ending stocks are forecast at 106.1 million bales by the end of 2015/16, nearly 4 million bales below 2014/15. While stocks are expected to decline for the first time in 6 years from last season’s record, they remain more than double the level in 2010/11. Despite a rise in cotton consumption, the world stocks-to-use ratio is estimated to decrease only slightly to 92 percent. As a result, the 2015/16 world cotton price is projected to remain near the current season’s average; in 2014/15, the world price is expected to average near 71 cents per pound, the lowest in 6 years.
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