Cotton stocks outside China are projected to soar 26%

Cotton stocks outside China are projected to soar 26%

Excess cotton stocks held outside China are likely to keep international cotton prices down in 2015/16, says the International Cotton Advisory Committee (ICAC).

China is expected to end 2014/15 with 12.4m tons of stock, up 3% from last season, and stocks outside China are projected to soar 26% to 9.4m tons, the highest level in 35 years.

In the last two seasons, sales from China’s national reserve were well under way in April with around 1.3m tons sold at the end of April 2013 and 1.4m tons at the end of April 2014. Although China announced last spring it was ending its reserve policy, the government still holds over 11m tons, and sales were initially anticipated to occur this spring.

However, sales have not yet begun and the Chinese government has not announced an official date for sales to start this year.

The ICAC's May report shows world acreage is projected to drop 7% to 31.2m hectares. Assuming a world average yield of 765 kg/ha, production is forecast down 9% at 23.9m tons from 2014/15.

After reaching a record area of 12.3m hectares in 2014/15, acreage in India is forecast down 5%, and production down 3%. The Chinese government announced a cotton subsidy price of 19,100 yuan per ton for 2015, down from 19,800 yuan per ton in 2014. Accordingly, its acreage is expected to contract 12% to 3.8m hectares, and production to fall by 16% to 5.4m tons.

World cotton consumption is forecast up 2% to 24.1m tons in 2014/15, and up 2% to 24.5m tons in 2015/16 as spinning shifts from China to the rest of Asia.

Low domestic cotton prices may enable cotton consumption in China to rise 2% to 7.7m tons in 2014/15 after falling for four consecutive seasons.