Cotton Production Falls in South Hemisphere

In 2014/15, world production is projected to remain stable at 26.2 million tons despite a 3% increase in area to 33.7 million hectares. India, China, the United States and Pakistan are expected to account for 80% of production in the North Hemisphere, which is projected up 2% to 23 million tons with lower yields offsetting the 4% gain in area. In contrast, area in the Southern Hemisphere is forecast down 12% to 3 million hectares, the lowest level in five seasons, due to low world prices. Assuming an average yield of 853 kg/ha for the region, production is anticipated to fall 18% to 2.6 million tons, which accounts for 10% of expected world production in 2014/15. Brazilian farmers are less enthusiastic to plant cotton this season as many find that even with government support, current prices do not cover productions costs and area is forecast to fall 13% to 975,000 hectares. Assuming an average yield of around 1,522 kg/ha, production is projected at 1.5 million tons. The ongoing drought in Australia has left soil dry and reduced irrigation supplies. Area is forecast down 28% to 282,000 hectares, and production could decrease by 35% to 580,000 tons, the lowest volume since 2009/10. For Southern and Eastern Africa, area is projected down 7% to 1.4 million hectares. However, unlike last season, rains have been more plentiful at sowing, and yield is likely to improve 6% to an average of 237 kg/ha, resulting in 329,000 tons of lint for the region, down 2% from 2013/14.

After declining 1% in 2013/14, world consumption is expected to recover by 3.8% to 24.4 million tons. The top five consumers of cotton in 2014/15 are likely to be China, India, Pakistan, Turkey and Bangladesh. Lower domestic prices and government incentives are helping the spinning industry in China to recover with consumption forecast to increase to nearly 8 million tons. India’s consumption is projected at 5.3 million tons, which is the third consecutive season of growth, but at a slower rate than the previous two seasons as yarn demand from China is falling. In 2013/14, insufficient electricity contributed to the 6% reduction in Pakistan’s consumption and while electricity supplies still remain a problem, its consumption is forecast to rise 2% to 2.3 million tons in 2014/15. Consumption in Turkey is projected up 4% to 1.5 million tons in 2014/15 while consumption in Bangladesh is up 1% to 954,000 tons.

World cotton trade is forecast down nearly 1 million tons to 7.9 million tons, which is the third consecutive season in which world imports have fallen. This is in line with the fall in China’s imports from over 5.3 million tons in 2011/12 to less than 2 million tons in 2014/15. As China’s imports have fallen, imports outside of China have grown. However, the rate of growth has declined. In 2012/13, imports outside of China increased by 19% to 5.2 million tons while in 2014/15, imports outside of China are projected to expand 4% to 5.9 million tons, reflecting the growth in consumption outside of China. Bangladesh, Turkey, Vietnam and Indonesia are expected to be the largest importers outside of China in 2014/15.

WORLD COTTON SUPPLY AND DISTRIBUTION
	2012/13	2013/14	2014/15		2012/13	2013/14	2014/15
					Changes from previous month
	Million Tons				Million Tons
Production	26.67	26.24	26.24		0.00	0.00	-0.03
Consumption	23.73	23.50	24.40		0.15	0.04	-0.05
Imports	9.66	8.75	7.85		0.00	-0.01	0.00
Exports	10.17	8.87	7.85		0.00	0.01	0.00
Ending Stocks	16.94	19.57	21.41		-0.16	-0.21	0.19
Cotlook A Index*	88	91	73

*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: 63 cts/lb to 86 cts/lb.