2015/16 Area and Production Down

World area is projected to decrease 7% to 31.2 million hectares, and assuming a world average yield of 765 kg/ha, production is forecast down 9% at 23.9 million tons from 2014/15. After reaching a record area of 12.3 million hectares in 2014/15, area in India is forecast down 5% to 11.6 million hectares, and production down 3% to 6.4 million tons in 2015/16. The Chinese government announced a cotton subsidy price of 19,100 yuan per ton for 2015, down from 19,800 yuan per ton in 2014. Accordingly, area in China is expected to contract 12% to 3.8 million hectares, and production could decrease by 16% to 5.4 million tons. In the United States, prices for some competing crops are likely to discourage farmers from planting cotton, and area is expected to fall 17% to 3.3 million hectares. Assuming an average yield of 912 kg/ha, production in the United States could reach 3 million tons in 2015/16. Pakistan’s production is on track to reach over 2.3 million tons in 2014/15, around 100,000 tons under peak production of 2.4 million tons achieved in 2004/05. Pakistan’s average yield is expected to set a new record in 2014/15, and is projected up 14% to 810 kg/ha. However, in response to low prices, cotton area in Pakistan is forecast down 6% to 2.7 million hectares, and production down 11% to 2 million tons in 2015/16.

In the last two seasons, sales from China’s national reserve were well underway in April with around 1.3 million tons sold at the end of April 2013 and 1.4 million tons at the end of April 2014. Although China announced last spring that it was ending its reserve policy, the Chinese government still holds over 11 million tons, and sales were initially anticipated to occur this spring. However, sales have not yet begun and the Chinese government has not announced an official date for sales to start this year. To bolster sales of cotton from the current season’s domestic crop and potentially sales from the reserve, the Chinese government limited import quota in 2015 to the volume required under WTO rules of 894,000 tons. Although domestic prices have fallen, they are still relatively high compared to international prices and to polyester prices. China is expected to end 2014/15 with 12.4 million tons of stock, up 3% from last season, and stocks outside China are projected up 26% to 9.4 million tons, which is the highest level in 35 years. Excess stocks held outside China are likely to keep international cotton prices down in 2015/16.

World consumption is forecast up 2% to 24.1 million tons in 2014/15. Just before the start of 2014/15, cotton prices fell quickly while polyester remained flat. However, in the following months, polyester prices have also dropped, diminishing the likelihood that cotton will regain market share from polyester. Cotton consumption is likely to grow modestly next season, driven by increases in population and moderate economic growth. In 2015/16, world consumption is projected up 2% to 24.5 million tons as spinning shifts from China to the rest of Asia. Low domestic cotton prices may enable cotton consumption in China to rise 2% to 7.7 million tons in 2014/15 after falling for four consecutive seasons. In 2015/16, consumption is expected to remain stable at 7.7 million tons as domestic yarn competes with imports. In the first three months of 2015, imports of cotton yarn into China increased 15% to 590,500 tons compared with the same period in 2014. Much of these imports come from nearby countries such as India, Pakistan, Bangladesh and Vietnam.

After a significant fall in 2014/15 to 7.5 million tons, world imports are expected to stage a partial recovery, increasing 3% to 7.7 million tons in 2015/16.

WORLD COTTON SUPPLY AND DISTRIBUTION
	2013/14	2014/15	2015/16		2013/14	2014/15	2015/16
					Changes from previous month
	Million Tons				Million Tons
Production	26.30	26.34	23.89		0.03	-0.09	-0.10
Consumption	23.48	24.05	24.47		-0.01	-0.09	-0.08
Imports	8.74	7.47	7.71		-0.01	0.08	0.03
Exports	8.89	7.47	7.71		0.02	0.08	0.03
Ending Stocks	19.52	21.81	21.23		0.04	0.04	0.02
Cotlook A Index*	91	70*	62**

*The price projection for 2014/15 is based on the ending stocks/mill use ratio in the world-less-China in 2012/13 (estimate), in 2013/14 (estimate) and 2014/15 (projection), on the ratio of Chinese net imports to world imports in 2013/14 (estimate) and 2014/15 (projection). The price projection is the mid-point of the 95% confidence interval: 66 cts/lb to 74 cts/lb.
**The price projection for 2015/16 is based on the ending stocks to mill use ratio in the world-less-China in 2013/14 (estimate), 2014/15 (projection) and 2015/16 (projection), on the ratio of Chinese net imports to world imports in 2015/16 (projection), and on the price projection for 2014/15. The price forecast for 2015/16 is the mid-point of the 95% confidence interval: 50 cts/lb. to 77 cts/lb.