World cotton prices revised again on higher production
World cotton production in 2016/17 is expected to increase by 7% to 22.6m tons
Estimates for average cotton prices in the current season have been lowered slightly as revised forecasts suggest increased production in the US, Pakistan and Brazil will offset losses in China.
Last month the International Cotton Advisory Committee (ICAC) lifted its estimates for average cotton prices to a three-year high of 75 cents a pound in the current year.
But in its latest monthly update yesterday (3 October), the inter-governmental group said it expects average world cotton prices in the 2016-17 season – which began on 1 August – to be 73 cents/lb as measured by the Cotlook A index. This would represent a rise of just 3 cents/lb on last season's average price.
The ICAC also forecasts that world cotton area in 2016/17 will fall by 1% to 30m hectares – which is the smallest amount of area under cotton since 2009/10, when the planted area reached 29.7m hectares.
The average yield is projected to improve by 9% to 753 kg/ha, and world production in 2016/17 is expected to increase by 7% to 22.6m tons.
Cotton area in India contracted by 8%, to just under 11m hectares, due to competition from other crops such as maize. However, a 9% increase in the average yield to 526 kg/ha will likely offset the losses in area and production is expected to remain stable at 5.8m tons.
China's cotton production is projected down 4% to 4.6m tons despite a 3% gain in the average yield to 1,600 kg/ha. The total area brought under cotton in China shrank by 7% to 2.8m hectares, the lowest in more than 30 years.
Higher cotton prices compared to competing crops at the time of planting led to a 20% increase in cotton area in the US, estimated at 3.9m hectares. Beneficial weather during the growing season is expected to lead to a 5% improvement in the average yield to 899 kg/ha. As a result, cotton production in the US is forecast to increase by 25% to 3.5m tons.
Although the cotton area in Pakistan declined by 12% to 2.5m hectares, its production in 2016/17 is projected to rise by 26% to 1.9m tons as the national average yield increases by 43% to 756 kg/ha due to the success of the preventative measures taken against pink bollworm. Improved yields in Brazil could increase its cotton production by 7% to 1.4m tons.
In 2016/17, world cotton consumption is forecast to remain unchanged from 2015/16 at 23.8m tons, but is projected to exceed production by 1.3m tons. As a result, world stocks are projected to decline by 7% to 18.1m tons.
Although China's consumption is forecast to decline for the seventh consecutive season by 2% to 7.2m tons, it will continue to be the world's largest consumer of cotton. Domestic cotton prices have fallen since China implemented its direct production subsidy policy, yet they remain above levels on the international market and well above polyester prices.
India's cotton consumption is projected to remain stable at 5.2m tons as mills increase the share of other fibres in cotton-blended yarns. Pakistan's mill use is expected to increase by 23,000 tons to 2.3m tons, assuming that the energy situation improves.
Exports from the US are projected to increase by 26% to 2.5m tons while exports from India, the second largest exporter, are forecast to fall by 35% to 820,000 tons.
Bangladesh is expected to remain the world's largest importer as its volume increases by 10% to 1.2m tons in order to satisfy growing demand. Similarly, Vietnam's imports are likely to rise by 15% to 1.1m tons.
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