China’s Excess Stocks, Going Away Soon?

China’s price support and import polices have resulted in its stocks-to use ratio surging to a record level of 180 percent in 2013/14. In contrast, from 2002/03-08/09 the stocks-touse ratio averaged 49 percent. This would imply that current stocks are over 45 million bales above average, or more than two and a half years of U.S. production. Chinese officials have stated that the current level is abnormally high and should be reduced.

To return to the normal levels, China would have to produce less, consume more, and/or reduce net imports. Production would have to drop by 25 percent from the current level for six years, consumption would have to rise by 20 percent for more than six years, or imports would have to be reduced to the World Trade Organization tariff rate quota level for 16 years.

Given the magnitude of the current situation, implementing policies to reduce stocks will be a daunting endeavor. Therefore, China’s excess stocks are likely to be around for a while.

Overview

For 2014/15, world ending stocks are forecast higher because of smaller use and larger carry-in and production.

Total trade is lower. U.S. beginning stocks, production, exports, and ending stocks are down. The forecast for the season average U.S. farm price range is lowered 1 cent to 64 cents/pound.

Prices

The A-Index has risen slightly on concerns about availability for near-by delivery.

2014/15 TRADE OUTLOOK

Major Exporters:

• United States is lowered 700,000 bales to 10.0 million on a smaller crop.

• Uzbekistan is down 150,000 bales to 2.3 million on a smaller crop.

• India is cut 100,000 bales to 5.7 million on weaker global import demand.

Major Importers:

• Pakistan is down 600,000 bales to 1.6 million on lower demand.

• India is reduced 300,000 bales to 800,000 on a larger crop.

• Turkey is down 250,000 bales to 3.75 million on a larger crop.

• Vietnam is raised 100,000 bales to 3.4 million as stocks build from low levels