Global Consumption Rises Above Production, Stocks Fall

USDA's initial forecast for 2015/16 shows world consumption exceeding production for the first time in 6 years. As a result world stocks will decrease by almost 4 percent to 106.5 million bales; however, the stocks-to-use ratio of 92 percent will remain near historic highs.

World production is forecast to fall nearly 7 percent in response to lower prices in most major producing regions. India is forecast to decline only slightly as its support policy protects farmers from world prices decline. China is expected to fall by 10 percent to the lowest level since 2003, led by a steep decline in eastern provinces due to the less generous level of support under the current program. Xinjiang will likely decline slightly in response to a reduced target price and efforts to exclude unregistered land from receiving subsidies. An 11 percent drop is projected for the U.S. as harvested area responds to lower prices.

World consumption is forecast to increase by 3.5 percent, based on world GDP growth and the lagged effect of falling cotton prices. China is forecast to increase at less than the world rate as domestic policies keep cotton prices above world prices despite its massive stock level. Structural changes in China's spinning sector will limit growth. Outside of China, growth is expected to be focused in those countries which have benefited from the situation in China. India, Pakistan, and Southeast Asian countries in particular are expected to continue to experience spinning growth.

Despite rising demand in import dependent counties such as Pakistan and Southeast Asia, world trade is expected to virtually unchanged. Imports in China are expected to fall to the lowest level in 13 years due to continuing import restrictions accompanying efforts to reduce government-held stocks. India's exports are expected to increase sharply in response to the large carry-in stocks that resulted from this season's support policy. Australia's exports are expected to decline due to a second season of unfavorable weather and planting conditions.

Overview

For 2015/16, world stocks are expected to decrease for the first time in five years due to growing consumption outside of China, a reduction in China's stocks, and lower global production. Continued low prices are expected to weigh on global production. Trade is down, largely due to continued declines in Chinese imports. The U.S. season average farm price is projected at 60 cents/pound, with the mid-point unchanged from the current season estimate.

For 2014/15, world production is relatively unchanged. World trade, use, and stocks are raised. Forecasts for the U.S. for 2014/15 are unchanged. The forecast for the U.S. season average farm price is maintained at 60 cents/pound.

Prices

Market concerns over tightening supplies of desirable cotton grades have helped push the A-Index and spot prices up to levels not seen since the beginning of the season.

2015/16 TRADE OUTLOOK

Major Exporters:

  • India is up 1.1 million bales to 5.0 million on higher carry-in stocks.
  • Australia is cut 800,000 bales to 2.0 million on lower production.
  • Brazil is cut 400,000 bales to 3.6 million on lower exportable supply.
  • Mali is up 250,000 bales to 950,000 on two years of large crops.

Major Importers:

  • China is reduced 1.7 million bales to 6.0 million on continuing policy constraints.
  • Pakistan is raised 900,000 bales to 1.7 million on lower production and rising use.
  • India is lowered 200,000 bales to 900,000 on large available stocks.
  • Mexico is up 175,000 bales to 1.0 million on lower production and rising use.
  • Indonesia is raised 150,000 bales to 3.5 million on rising use.
  • Bangladesh is increased 100,000 bales to 4.6 million on consistently growing demand.
  • Brazil is increased 100,000 bales to 150,000 on lower exportable supplies and rising use.
  • Egypt is up 100,000 bales to 450,000 on greatly reduced production due to policy changes.
  • Vietnam is increased 100,000 bales to 4.2 million on rising use.

2014/15 TRADE CHANGES

Major Exporters:

  • Malaysia is cut 700,000 bales to 100,000 on greatly reduced transit trade.
  • Brazil is raised 150,000 bales to 4.0 million on strong demand for machine picked cotton.
  • Cote d'Ivoire is raised 75,000 bales to 800,000 on strong deliveries, especially to Far Eastern markets.
  • Pakistan is reduced 50,000 bales to 550,000 on recent slower activity.

Major Importers:

  • Malaysia is cut 850,000 bales to 300,000 on greatly reduced transit trade.
  • China is raised 200,000 bales to 7.7 million on strong demand for high grades of cotton.
  • Pakistan is raised 100,000 bales to 800,000 on strong mill use and deliveries