South and Southeast Asia Yarn Spinning Displaces China

Driven by growth in India, Vietnam, Bangladesh, and Indonesia, yarn spinning in South and Southeast Asia surpassed Chinese yarn spinning in 2011/12, and has been rising ever since. Meanwhile, yarn spinning in the rest of the world has remained roughly flat. This historic rise in South and Southeast Asian yarn spinning is in part due to the confluence of high internal prices for cotton in China, and China's uniquely dominant position in yarn spinning over the last decade. From 1960 to 2000, China reliably led global consumption, at around 20 to 25 percent of the world total. From 2000 to 2010, however, it rose to 40 percent, even as global consumption grew. With so much consumption in one country, any policy change in China was likely to have an outsized impact.

Under its stock accumulation and price support policies over the last several years, Chinese internal cotton prices were well above global averages. This pushed yarn spinning into other nearby markets. With rising labor costs, lower crop subsidies, and the imposition of tighter import controls in China over the last year, yarn spinning is expected to continue expanding rapidly in South and Southeast Asia. China's share of global consumption is expected to remain low relative to recent years. On May 12, USDA will release its first global, country-level forecasts.

Overview

For 2014/15, world production, consumption, and ending stocks are relatively unchanged. World trade is revised down marginally. U.S. production and ending stocks are raised, while exports and consumption are unchanged. The forecast for the U.S. season average farm price is lowered to 60.0 cents/pound.

Prices

The A-Index and spot prices continue to show a slight recovery on market concerns over tightening supplies of desirable cotton grades.

Export Sales

Total commitments as of April 2nd were 10.23 million running bales, which represents 98 percent of the current 2014/15 export forecast. Accumulated exports reached 6.44 million bales. The 4-week moving average of export shipments reached 350,000 bales/week, the highest level in over a year.

However, accumulated exports relative to marketing year expected total shipments still remain below the average of recent years. While shipments remain behind recent years, high outstanding sales support current forecasts.

2014/15 TRADE CHANGES

Major Exporters:

  • Australia is down 200,000 bales to 2.8 million on tight end of season exportable supplies.
  • India is lowered 300,000 bales to 3.9 million on weak demand in China and higher internal prices supported by domestic policy.
  • Greece is raised 150,000 bales to 1.05 million on strong demand, especially from Turkey.
  • Brazil is raised 100,000 bales to 3.85 million on strong demand for machine picked cotton.
  • Turkmenistan is raised 100,000 bales to 700,000 on lower internal demand.
  • Mali is down 100,000 bales to 700,000 on slower recent activity.

Major Importers:

  • Hong Kong is reduced 225,000 bales to zero on closure of sole remaining spinning mill.
  • China is raised 200,000 bales to 7.5 million on strong demand for high grades of cotton.
  • Vietnam is increased 150,000 bales to 4.1 million on strong yarn export demand.
  • Brazil is lowered 100,000 bales to 50,000 on slower domestic demand.