Cotton Consumption and Production Continue to Fall

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Forecasts for Consumption and Production Continue to Fall

cotton

Cotton 2015/16 Trade Outlook

Major Importers:

  • China is cut 500,000 bales to 5.0 million on declining mill use and potential reserve stock release.
  • Pakistan is lowered 400,000 bales to 2.3 million on declining mill use.
  • India is down 100,000 bales to 900,000 on the pace of trade to date.

Major Exporters:

  • The United States is slashed 500,000 bales to 9.5 million on weaker demand in China and quality
    concerns regarding the U.S. crop.
  • Pakistan is reduced 100,000 bales to 250,000 on a lower exportable supply.
  • India is down 100,000 bales to 5.7 million on weaker import demand in China and Pakistan.
  • Brazil is down 100,000 bales to 4.2 million on the pace of trade to date

Cotton Supply and Demand Forecast

Cotton price dropped after the USDA released Cotton’s World Markets and Trade Report. World consumption forecasts have deteriorated significantly from 116 million bales to under 109 million bales. This difference is equivalent to a change from a 4.2 percent growth rate to a -0.6 percent growth rate. The vast majority of this change comes from
declining expectations of cotton use in China, forecasts of which fell from 37.5 million bales to 32.0 million bales.

Outside of China, consumption forecasts have fallen less than 1 million bales, and indeed USDA continues to forecast 0.4 percent growth outside of China versus 2014/2015. The worsening outlook for Chinese cotton use stems from low state reserve sales, continuing import restrictions, declining polyester prices, and a weakening outlook for Chinese economic activity.

Forecasts for global production since last February have deteriorated even more. Production forecasts have fallen steeply by 15 percent in China and 9 percent elsewhere, with Pakistan in particular more than 25 percent lower than the February Outlook forecast. This decline in production implies that, despite worsening consumption forecasts, destocking has continued at an even faster rate than initially forecast. Global stocks have are forecast to tighten by 8.1 million bales rather than 3.0 million.

With supply and demand complementing each other, prices can be expected to remain flat or even lower.

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