China Policy Changes Leaves Others Holding Stocks

China’s ending stocks in 2013/14 increased by more than 12 million bales as government policies encouraged massive stock building. As a result, stocks in the rest of the world declined overall, and in most countries. Brazil was the notable exception, as a large increase in production pushed stocks higher.

In early 2014, China announced changes in government policy designed to reduce stocks, which will result a much different pattern of stock accumulation. China’s stocks are now expected to increase only marginally in 2014/15 as these changes begin to take effect. Southern hemisphere exporters’ (Brazil and Australia) stocks are forecast to fall, largely due to reduced production. As stocks decline in these countries, the rest of the world will see stocks increase dramatically. With substantially lower imports by China, ending stocks in the United States and India will both rise sharply, with stock-to-use ratios at their highest level in 6 years. Even importing countries will see a significant increase in stocks as lower prices stimulate buying.

Overview

For 2014/15, world production is up marginally and consumption down slightly. Ending stocks are raised slightly. Total trade is down marginally. U.S. production is slightly larger, while consumption and exports are unchanged, resulting in higher ending stocks. The forecast for the season average U.S. farm price range is unchanged at 61.5 cents/pound.

Prices

The A-Index and spot prices continue to drift sideways as northern hemisphere crops arrive on the market in the face of weak demand.

2014/15 TRADE CHANGES

Major Exporters:

• India is lowered 300,000 bales to 4.7 million on a smaller crop.

• Tanzania is up 100,000 bales to 275,000 on a larger crop.

Major Importers:

• Pakistan is down 400,000 bales to 1.0 million on a larger crop