World Cotton Trade to Recover in 2015/16

In 2011/12, Chinese imports more than doubled from the previous season to 5.3 million tons and surpassed the total volume of imports by the rest of world, which reached only 4.4 million tons. However, in the following seasons, Chinese imports declined while imports outside of China have steadily grown. In 2014/15, imports outside of China are likely to increase 6% to 5.9 million tons, but will not offset the 45% decline in Chinese imports to 1.6 million tons. As a results world imports are projected down 12% to 7.5 million tons in 2014/15. However, in 2015/16 world cotton imports may recover modestly, increasing 2% to 7.7 million tons with imports outside of China rising by 3% to 6.1 million tons. Bangladesh, Vietnam and Indonesia are expected to be the three largest importers outside of China in 2015/16 due to the continued growth in their spinning sectors that rely primarily on imported cotton. Bangladesh’s imports are forecast at just under 1 million tons in 2014/15 and are expected to remain stable in 2015/16. Vietnam’s imports are projected up 6% to 927,000 tons in 2015/16 and Indonesia’s imports up 4% to nearly 800,000 tons. U.S. exports which experienced good demand for much of 2014/15, are expected to remain stable in 2015/16 at 2.3 million tons. On the other hand, India’s exports are projected down 50% in 2014/15 to 1 million tons, but could recover partially in 2015/16 to 1.2 million tons.

World cotton area is forecast down 7% to 31.3 million hectares in 2015/16 due to low prices in 2014/15 and as a result, world cotton production is projected down 9% to 23.9 million tons. The announcement of a lower subsidy for 2015 in China is expected to lead to a 12% decrease in area to 3.8 million hectares. Production in China could fall to 5.4 million tons in 2015/16. Area in India reached a record 12.3 million hectares in 2014/15, but will likely decrease 5% to 11.6 million hectares in 2015/16. Applying the average yield in the last three years would result in a 2% decline in production to 6.4 million tons. Area in the United States is forecast to fall 15% to 3.3 million hectares due to low international prices and adverse weather conditions. Assuming a yield of 912 kg/ha, production in the United States is projected down 14% to 3 million tons.

World cotton consumption increased 3% in 2014/15 to 24.3 million tons and is projected to grow another 2% in 2015/16 to 24.9 million tons. Domestic cotton prices in China fell from an average of 139 cents/lb in 2013/14 to just under 100 cents/lb in the first five months of 2015 due to the ending of China’s reserve policy and a shift toward a more market-oriented policy. Assuming prices remain around the same level in 2015/16, cotton consumption is likely to remain stable at 7.7 million tons in 2015/16. Instead, consumption is expected continue growing in nearby countries. Consumption in India, the second largest consumer of cotton lint, is projected up 3% to 5.4 million tons in 2015/16. Despite strong competition from yarn imports, Pakistan’s consumption is expected to grow 3% to 2.6 million tons in 2015/16.

World ending stocks are forecast to decrease for the first time since 2010/11, falling 5% to 20.8 million tons in 2015/16. Although China’s ending stocks are projected down 6% to 11.8 million tons, it would still hold 56% of the world’s stocks at the end of 2015/16. After increasing 19% in 2014/15 to 9.4 million tons, ending stocks held outside of China are expected to decline 3% to 9.1 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	26.17	23.90		0.00	-0.16	0.01
Consumption	23.76	24.36	24.93		0.28	0.31	0.46
Imports	8.68	7.52	7.68		-0.06	0.05	-0.03
Exports	8.88	7.52	7.68		0.00	0.05	-0.03
Ending Stocks	20.00	21.82	20.79		0.48	0.01	-0.44
Cotlook A Index*	91	71*	72**

*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: 69 cts/lb to 75 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: 57 cts/lb. to 88 cts/lb.