2014/15: Global Stock Building Slows and Trade Falls

The initial outlook for 2014/15 has global ending stocks projected at another record level, despite a forecast decline in production and rise in consumption. Stocks outside of China are expected to increase for the first time in three years because of reduced import demand from China.

Changes to China’s cotton support policy, designed to limit accumulation of reserve stocks, are likely to restrict imports in favor of consumption of domestic cotton. With China’s imports forecast to fall by one third and trade elsewhere flat, global trade is expected to drop 10 percent.

Despite this overall bearish scenario, cotton prices are projected to remain relatively high because the massive reserve stocks in China are expected to remain off the market under the current policy. However, any future changes to that policy which result in significant quantities moving out of the reserve could have a negative impact on prices.

Overview

For 2014/15, world stocks are forecast to increase for the fifth consecutive year despite lower production and higher consumption. Trade is down, mainly due to reduced import demand by China. U.S. production is expected to rise sharply, however exports are forecast down on tight beginning stocks and reduced demand. The season average U.S. farm price range is projected at 63 to 83 cents/pound, with the mid-point 4.5 cents lower than the current season estimate.

For 2013/14, world trade is raised, while production and ending stocks are up slightly. U.S. exports are lower and stocks higher, while the forecast season average farm price remains unchanged. For current prices received by farmers.

Prices

The U.S. spot price and the A-Index continued to be supported by China’s reserve policy and tight supplies in the United States.

2014/15 TRADE OUTLOOK

Major Exporters:

• U.S. is down 700,000 bales to 9.7 million on lower world demand.

• India is cut 3.1 million bales to 5.7 million on reduced exportable supplies.

• Brazil is up 1.2 million bales to 3.5 million on greater production.

• Australia is lowered 1.4 million bales to 3.2 million on declining production.

• Burkina Faso is cut 100,000 bales to 1.1 million on a smaller crop.

• Argentina is up 100,000 bales to 350,000 on a larger crop.

• Syria is down 125,000 bales to 100,000 on a smaller crop.

Major Importers:

• China is lowered 4.25 million bales to 8.5 million as policy changes are expected to reduce imports.

• Bangladesh is up 200,000 bales to 4.3 million on growing use.

• Turkey is down 450,000 bales to 3.8 million on a projected rebound in domestic production.

• Pakistan is raised 500,000 bales to 3.0 million on rising use.

• Indonesia is up 150,000 bales to 2.8 million on higher consumption.

• Vietnam is lowered 300,000 bales to 2.7 million on declining use.

• India is increased 250,000 bales to 1.0 million on tighter supply.

Trade Changes for 2013/14

Major Exporters:

• United States is down 300,000 bales to 10.4 million on weak end-of-season sales.

• India is up 800,000 bales to 8.8 million on greater demand from China.

• Australia is raised 100,000 bales to 4.6 million on stronger demand from China.

• Cote d’Ivoire is up 100,000 bales to 700,000 on a larger crop.

• Syria is increased 100,000 bales to 225,000 on falling domestic use.

Major Importers:

• China is up 750,000 bales to 12.75 million on recent activity and increased import licenses.

• Bangladesh is raised 200,000 bales to 4.1 million on analysis of new data sources