Cotton. USDA report. Feb 2015 March 11, 2015
Chinese Cotton Prices Diverge
With China's recent change from a price support to a direct payment subsidy program for growers, effective prices for farmers and textile mills have diverged widely. The 2014/15 target price for Xinjiang growers is only 3 percent below the 2013/14 support price. The internal market price paid by mills fell over 30 percent, although it remains nearly 50 percent above world prices. The effective price for growers in the rest of China, including a small and unclear direct payment, fell by 24 percent, near the same rate as prices globally. As such, production in Xinjiang has had comparatively little response, while production in the rest of China has fallen much more significantly. As Xinjiang 2015/16 target prices are announced, and as growers outside of Xinjiang become accustomed to the new direct payment program, further changes are expected.
Outside of China, most traded prices declined between 23 and 26 percent, in line with the A-Index, a broad measure of world prices. The only other major exception is India. Despite a near record crop and mounting stocks, India's prices declined somewhat less than the global average, in part due to its Minimum Support Price program which has temporarily taken cotton off the market.
For 2014/15, world consumption is lowered. Production and trade are raised slightly with ending stocks up. U.S. production is unchanged, however lower consumption and higher exports reduce ending stocks. The forecast for the season average U.S. farm price range is lowered a half a cent to 61.0 cents/pound.
The A-Index and spot prices have shown a slight recovery on market concerns over tightening supplies of desirable grades of cotton.
2014/15 TRADE CHANGES
- United States is raised 700,000 bales to 10.7 million on strong demand for machine picked cotton.
- India is lowered 500,000 bales to 4.2 million as the support program holds cotton off the market.
- Pakistan is up 150,000 bales to 600,000 on a larger crop and strong shipments to India.
- China is raised 300,000 bales to 7.3 million on recent purchases.
- Vietnam is up 200,000 bales to 3.8 million on strong demand for yarn exports.
- Indonesia is up 100,000 bales to 3.25 million on recent higher reported activity.
- Pakistan is down 200,000 bales to 800,000 due to the larger crop.