Cotton: World Markets and Trade. Apr 2014 April 14, 2014
Abundant Chinese Stocks Mask Global Picture
Despite record high global stocks, those held outside of China are projected at a 4-year low. Major exporters hold more than half of those stocks. In fact, U.S. stocks are forecast to fall to their lowest level since 1990/91. Driving this paradox is China’s support policy. Until recently, it was based on building stocks, which moved excess global supply off the market (and into the State Reserve), effectively supporting world prices.
However, new policies to limit import opportunities and encourage Reserve Sales may halt the further accumulation of stocks by China next season. With world production expected to exceed consumption for the fifth consecutive year, efforts by China to dispose of State Reserve stocks are likely to cause world prices to fall.
Global cotton production is virtually unchanged. Ending stocks are lowered slightly on higher consumption. U.S. production and ending stocks are down, while exports and consumption are unchanged. The season average farm price is raised.
The U.S. spot price and the A-Index showed little movement as the markets await more information about changes to China’s reserve policy.
2013/14 TRADE OUTLOOK
• Australia is revised up 700,000 bales to 4.5 million on increased demand from China.
• India is raised 500,000 bales to 8.0 million on higher import demand from Pakistan.
• Brazil is lowered 100,000 bales to 2.3 million due to limited exportable supplies.
• Burkina Faso is raised 100,000 bales to 1.2 million on a larger crop.
• Pakistan is down 100,000 bales to 400,000 on higher mill use.
• China is raised 1.0 million bales to 12.0 million on the likely release of new import quotas.
• Pakistan is up 500,000 bales to 2.5 million on stronger demand.
• India is revised down 350,000 bales to 750,000 on recent trade data.
• Indonesia is down 100,000 bales to 2.65 million on lower mill use.
• Vietnam is up 100,000 bales to 3.0 million on higher mill use