Washington DC (BBN) - Given the predicted 1.8 million tonnes of surplus cotton production and changes in China’s cotton policy, prices are unlikely to rise to the levels seen in the last two seasons, according to the International Cotton Advisory Committee (ICAC).
With the fall in prices, world cotton consumption is forecast to rise nearly 4.0 per cent to 24.4 million tonnes with more of the consumption occurring in the latter half of the season as the market becomes more certain about the size of the new crop and can better determine an appropriate price for cotton.
While cotton’s absolute volume of consumption is likely to grow, it will probably not gain back much of its market share as it takes time for the market to adjust, the ICAC said.
At the end of 2013/14, international cotton prices were around 80 U.S. cents/lb and have continued falling in the first two months of the new season.
The price volatility observed in 2010/11-2011/12 is not forgotten, and other competing fibers’ market shares have been growing.
In 2014/15, 33.8 million hectares were planted with cotton, up 3.0 per cent from last season due to higher international cotton prices in 2013/14. World cotton production is forecast up 1.0 per cent to 26.2 million tons.
With greater incentive to improve yield and quality due to the new policy, Xinjiang, the largest cotton-producing region in China and the province where the trial subsidy is being implemented, is expected to have a bigger harvest than last season, and China’s overall production is projected at 6.4 million tons in 2014/15.
India expanded cotton area by 5.0 per cent as the delayed monsoon encouraged farmers to switch to cotton, and with yield closer to the 3-year average, production is likely to reach 6.6 million tons, making India the world’s largest cotton producer 2014/15.
Harvested cotton area in the United States could reach 3.9 million hectares as plentiful rainfall reduces the abandonment rate this season and production is forecast at 3.7 million tons, up 30 per cent from 2013/14.
Although some flooding has occurred in Pakistan recently, impact to the cotton crop has been minimal, and production is projected at 2.1 million tonnes in 2014/15.
While China imported much of the surplus production in the last three seasons, this season it has announced that it will not provide additional quota in 2015, beyond the required 894,000 tons, as it has in recent seasons.
The restriction on imports next season was likely implemented to help reduce the large government-held cotton stocks given that China’s consumption is expected to exceed production by around 1.5 million tons.
Though some mills still hold additional quota for 2014, China’s imports are forecast to fall 36 per cent to 2.0 million tonnes, and world imports would decline 11 per cent to 8.0 million tons. Imports by the rest of the world, notably Southeast Asia, are projected to increase 2.0 per cent to 6.0 million tonnes.
BBN/SSR/AD-02Oct14-11:21 am (BST)