The impact of Hurricane Irma on US cotton production is yet to be evaluated

The impact of Hurricane Irma on US cotton production is yet to be evaluated

Global cotton production is expected to increase over the 2017/18 period according to new figures from the International Cotton Advisory Committee – although it is still assessing the full impact of Hurricane Harvey in the major cotton-producing state of Texas. 

In its September update, ICAC indicated production for the period would be 25.14m tonnes compared with its August forecast of 24.9m tonnes. This rise is largely due to a projection that world cotton area will expand 9% to 31.9m hectares and the average yield will remain unchanged at 789kg/ha.

Prices – as it indicated last month – are set to fall. The Cotlook A Index in 2017/18, which runs from August through to July, will range between 54 cents a pound and 87 cents a pound, with a midpoint of 69 cents a pound. The midpoint would be 13 cents a pound lower than in 2016/17.   

Cotton prices seen uncertain in upcoming season 

World cotton production

India will remain the largest global producer of cotton during 2017/18. 

The biggest surprise however is China. Following four seasons of decline, its cotton production is expected to rise 7% to 5.2m tonnes.

US cotton production is forecast to rise by 7% to 4.5m tonnes however the full impact of the impact of Hurricane Irma on Texas – where 45% of US production occurs – is yet to be determined.

Pakistan's cotton production is expected to grow 17% to 2m tonnes.

World cotton consumption

Global cotton mill use in 2017/18 is projected to increase by 2% to 25.1m tonnes. Mill use in China is expected to grow 1% to 8.1m tonnes. And India's cotton consumption is projected to grow 3% to 5.3m tonnes in 2017/18.

Widespread flooding during August in Bangladesh has damaged infrastructure making it difficult to transport goods throughout the country and to run business. Despite this, mill use is expected to remain stable at 1.4m tonnes in 2017/18.

World cotton stocks

World cotton stocks at the end of the 2017/18 period are expected to remain stable at 18.5m tonnes – the world stock-to-use ratio is expected to be essentially unchanged at about 75% over the period. Cotton outputs are expected to rise 9% in 2017/18 and consumption will rise 2%.

The Chinese government sold over two million tonnes from its national cotton reserve from May to August 2017, lowering the reserve to around 6.3m tons at the end of August 2017. China's cotton stocks are forecast to decrease another 16% to 8.9m tonnes, which would account for 48% of world stocks in 2017/18.

Ending stocks held outside of China are expected to increase by 22% to 9.6m tonnes in 2017/18.