The 77th annual International Cotton Advisory Committee (ICAC) Plenary Meeting in Uzbekistan gave the international cotton trade an opportunity to see the changes underway in the country's cotton and textile sector.
U.S. export shipments through 11 months of the 2016/17 marketing year are running more than 70 percent ahead of year-ago levels, keeping them on track to reach the USDA forecast of 14.5 million bales, the second highest level on record.
USDA's first detailed forecast for the 2017/18 marketing year shows a second year of production growth (nearly 7 percent), alongside the strongest consumption growth since 2012/13 (over 2 percent). Global consumption is expected to remain above production, yielding the third consecutive year of declining global stocks, albeit with a much smaller reduction than in the previous 2 years.
Estimates and forecasts for Bangladesh consumption and imports have been revised substantially upward this month as more detailed 2015/16 data has become available, specifically customs and Central Bank monthly import data.
While the U.S. share of Turkey's cotton imports has been declining for since its peak in 2010/11, U.S. cotton exports to Turkey have faced additional difficulties due to the initiation of an anti-dumping case against U.S. cotton in October, 2014.
Sales from China's State Reserve have remained very strong, despite rising prices. As of July 8 sales totaled 1.184 million tons, with over 97 percent of the cotton offered finding buyers. All of the cotton offered since June 28 has been sold. Nearly all of the cotton being offered in recent weeks has been domestic.
USDA's first detailed forecasts for the 2016/17 marketing year indicate substantially higher production, alongside a more muted increase in consumption, but still yielding the second consecutive year of declining global stocks.
Pakistan's consumption forecast was raised this month by 500,000 bales to 10.1 million. This demand is forecast to be met by higher imports, which are raised this month by 600,000 bales to 2.9 million, the second highest level on record. Strong textile exports, especially of apparel and bedwear, have forced Pakistan's textile sector to look to imported cotton, especially from India, to make up for a significantly smaller crop.
The last 12 months have seen a substantial change in expectations about global cotton production and consumption as shown in the above chart comparing USDA's February 2015 Outlook Forum projections with this month's updated forecast.
Cotton spinning in Vietnam has more than tripled in the last 4 years, with total use expected to reach 5.1 million bales in 2015/16. During this period, Vietnam accounted for half of the total world growth in cotton demand.
Despite a slow start, U.S. cotton exports are on track to reach the forecast of 10.0 million bales for 2014/15. By the end of the first quarter, accumulated exports are just 12 percent of the forecast, well behind recent years.
(July 2014) China's price support program, introduced in 2011/12, raised internal market prices for cotton substantially above world prices. Consequently, yarn, fabric, textiles, and apparel made from domestic cotton became less competitive compared to similar products containing man-made fibers or cotton from outside of China. As a result, mill use in China has fallen, while outside of China it has grown.
Much of the decline in Chinese mill use can be attributed to larger imports of lower priced cotton
Daily purchases from China's state reserve have fallen in recent weeks amidst market perceptions that reserve sale prices may be lowered, competition from foreign cotton, and the prospect of new-crop cotton offered below the current reserve sales price.
2014/15: Global Stock Building Slows and Trade Falls
(May 2014) The initial outlook for 2014/15 has global ending stocks projected at another record level, despite a forecast decline in production and rise in consumption. Stocks outside of China are expected to increase for the first time in three years because of reduced import demand from China.
Changes to Chinas cotton support policy, designed to limit accumulation of reserve stocks, are likely to restrict imports in favor of consumption of domestic cotton. With Chinas imports forecast to fall by one third and trade elsewhere flat, global trade is expected to drop 10 percent.
(August 2013) In 2012/13, U.S. exports to China remained well above historical levels as that countrys domestic price support policy continued to fuel import demand, albeit at a lower level than the previous season. Paradoxically, the support policy continued to make Chinas spinning sector less competitive, thereby boosting demand for cotton yarn from other countries. As a result, U.S. exports to other markets rebounded, notably to Turkey, Indonesia, Thailand, Vietnam, and Pakistan, which all saw growth of more than 50 percent.
According to the USDA 2013/14 outlook, world cotton ending stocks are projected to rise for the fourth consecutive year, to a record 88.5 million bales, despite lower production and higher consumption.