A 10% drop in global cotton stocks could bring the world’s cotton reserves down to a level not seen since the 2011/12 season, according to the latest update from an inter-governmental group.
The International Cotton Advisory Council (ICAC) projects the 2018/19 season will see a 3% decrease in production, a 3% increase in consumption, and a 10% drop in global stocks. The global stocks-to-use ratio is expected to drop to about seven months of mill use (0.61).
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The drop in global stocks will largely come from a drawdown in China’s warehouses. From March through August 2018, the Chinese State Reserve sold more than 2m tonnes of fibre, reducing stocks to about 8.6m tonnes. If production and consumption remain at current projected levels, the 2018/19 season is expected to further reduce stocks in China to 6.6m tonnes, reflecting a 23% decline.
Meanwhile, stocks outside of China are trending in the opposite direction, increasing 24% in 2017/18 to 10.1m tonnes. The increase is expected to slow in 2018/19, ticking upward to 10.2m tonnes. By the end of the coming season, warehouses outside of China are expected to house about 61% of the world’s global reserves.
Ending stocks in China reflect growing mill use in the country and may signal the possibility of increased imports in 2018/19, says the ICAC. In addition, growing global demand in 2018/19, despite uncertainty about trade policies, may lead to price increases amidst a possible global production decrease.
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