Global cotton consumption estimate decreases, says Cotton Incorporated

(Image source: Cotton Incorporated) The US-based Cotton Incorporated states in its latest Monthly Economic Letter that cotton prices trended lower or sideways last month, with the values for the most actively traded May New York futures contract declining from a general range between 95 and 99 US cents/lb to levels between 88 and 92 US cents/lb. Over the same time period, A Index prices generally held to values near 100 US cents/lb. According to the research and promotional organization for cotton, following India's announcement to halt exports on March 5, New York futures prices rose by 4 US cents/lb. The reaction in A Index prices was delayed a day, with values increasing by 4 US cents/lb on March 6. In later trading, both New York and A Index prices retreated. Uncertainty related to both the volume permitted and the regulatory process of exporting cotton from India has been widely cited as a factor contributing to price volatility during the 2010/11 crop year. The non-profit-making institution says developments related to India's current ban also seem to be a source of confusion, with the announcement appearing to have surprised several government ministers. An official review of the ban that took place on March 9 was mixed, easing certain restrictions but not entirely lifting the ban. On March 11, the Indian Trade Minister announced that exports would be allowed to resume. There had been a significant difference between the US Department of Agriculture (USDA) export figure for India (6.3 million bales) and the number widely cited by trade sources and the Indian press (9.4 million 375lb Indian bales, or the equivalent of 7.3 million 480lb US sized bales). But in its latest report, the USDA brought its figure in closer accord with those from other sources by increasing its export forecast for India by 1.5 million bales, according to Cotton Incorporated. The increase in Indian exports has been attributed to import demand from China, with the USDA reported to increase its import forecast for 2011/12 Chinese imports by 1.5 million bales. At 18.5 million bales, the current figure for Chinese imports is more than 50% higher than that in 2010/11. However, the increase in Chinese imports has been heavily supported by purchases related to the Chinese reserve system, not mill demand. According to Cotton Incorporated, the USDA lowered its consumption estimate for China by 500,000 bales in its latest report, bringing the current projection to 43.5 million bales. This current forecast is lower than both the figure for 2008/09 (44.0 million bales), which coincided with the worst of the global recession, and the figure for 2010/11 (46.0 million bales), when world cotton supplies were tight. With China estimated to represent 40% of global mill use, world consumption is also expected to be depressed this crop year. The forecast declined by nearly one million bales in the latest report, dropping from 109.7 million bales to 108.7 million bales. As was the case with China, current global consumption estimate for 2011/12 is both lower than that during the recession in 2008/09 (110.3 million bales) and lower than that in 2010/11 when world supplies were tight (114.5 million bales). Outside China, other country-level revisions were for Brazil (-300,000 bales), Egypt (-100,000 bales) and the US (-100,000 bales). South Korea was the only country with a significant increase in projected mill-use (+100,000 bales). The world production estimate increased by 300,000 bales, from 123.3 million to 123.6 million bales. The change in the global production figure was principally a result of higher harvest expectations in Brazil (+300,000 bales) and Pakistan (+200,000 bales) being partially offset by a lower forecast for Australia (-200,000 bales). Combined with a 273,000 bale addition to beginning stocks, the decrease in consumption and increase in production lifted forecast ending stocks by 1.6 million bales, to 62.3 million bales. This represents the second highest level of ending stocks on record, only 157,000 bales lower than the all-time high set in 2006/07.

Source: ATA Editorial Team

(KY)