Cotton Production to Recover in 2016/17 While Consumption Remains Stable

Cotton planting in Northern Hemisphere countries commences this month. In 2016/17, world cotton area is expected to expand by 1% to 31.3 million hectares. From December 2015 through February 2016, international cotton prices as measured by the Cotlook A Index averaged 69 cents/lb. However, prices for competing crops during the same period have fallen, making cotton more competitive this year compared to last. World cotton production in 2016/17 is projected to increase by 4%, to just under 23 million tons, as the world average yield is anticipated to improve by 4% to 732 kg/ha. In 2016/17, India’s area is forecast up 4% to 12.4 million hectares due to improved domestic cotton prices in 2015/16. Assuming yield is similar to the 4-year average of 522 kg/ha, production could reach 6.5 million tons in 2016/17. In March, the Chinese government announced a reduced target price for Xinjiang of 18600 yuan/ton. As a result, area is likely to contract by 10% to 3.1 million hectares and production to decrease to 4.6 million tons. Cotton area in the United States is projected to increase by 2% to 3.3 million hectares and production by 9% to 3.1 million tons. After production plummeted in 2015/16, cotton production in Pakistan is expected to jump 35% to 2.1 million tons as yields recover.

After declining by 2% in 2015/16, world cotton consumption is anticipated to remain stable at 23.9 million tons. Consumption in China is projected to decrease by 5% to 6.8 million tons due to increasing wages, high domestic cotton prices, and low polyester prices. In 2016/17, Vietnam’s cotton consumption is forecast to rise 16% to 1.3 million tons, making it the fifth largest consumer. Consumption in Bangladesh, the sixth largest, could increase by 10% to 1.2 million tons. After several seasons of growth, cotton mill use in India and Pakistan contracted in 2015/16 due to weaker demand. However, India’s consumption is projected to rise by 4% to 5.5 million tons, and in Pakistan by 1% to 2.2 million tons.

After declining by 3% in 2015/16, world cotton trade is expected to recover by 1% to 7.5 million tons in 2016/17, as consumption grows in import dependent countries. Vietnam and Bangladesh are likely to be the two largest importers of cotton in 2016/17, with import volumes expected to rise by 25% to 1.4 million tons and by 5% to 1.1 million tons, respectively. China could see imports fall by 13% to 936,000 tons. Exports from the United States are projected to increase by 1% to 2.2 million tons while exports from India are forecast to decline by 13% to 1 million tons.

In 2015/16, world ending stocks are expected to shrink by 8% to 20.3 million tons. The growth in cotton production while cotton consumption remains stable means that the reduction in stocks in 2016/17 will likely be smaller. World ending stocks are projected to fall by 5% to 19.4 million tons.