Executive Summary
Highlights from the August 2018 edition of Cotton This Month:
- Cotton demand is strong, with consumption projected to increase 4% to reach an all-time high of 27.5 million tonnes in 2018/19.
- After dropping from a season-high of 101.7 cents per pound in mid-June to 92 cents per pound in early July, prices have bounced back and remain higher than the season average of 88 cents per pound.
- Farmers’ ability to capitalise on the strong demand is limited due to environmental stresses and water availability.
- Cotton area in 2018/19 is projected to decrease in major producing countries including India (11.9 million hectares, down 3%) and the USA (4.25 million hectares, down 5%), although it should remain stable in China at 3.3 million hectares.
Consumption Projected at a Record 27.5 Million Tonnes in 2018/19
Although China’s tariffs on US cotton helped drag international prices down from June’s season-high of 101.7 cents per pound, strong demand in Asia and Southeast Asia has helped them rebound by the beginning of August. Usually, high prices drive an increase in cotton cultivation, but less-than-ideal environmental conditions and a lack of available water are projected to cause a reduction in planted area for many of the world’s top producers in 2018/19.
Sour trade relations between China and the USA show little signs of improving, and could even deteriorate further in the near term, potentially causing major shifts in global trade patterns. China’s 25% premium could prompt the USA, the world’s largest exporter, to seek new markets for its fibre, while other major exporters such as Brazil are expected to fill the void by increasing their shipments to China, the world’s largest importer.
Global production has increased 16% to 26.87 million tonnes in 2017/18, with increases expected from all major producers: India, China, USA, Brazil, Pakistan, West Africa, Turkey, Australia and Uzbekistan. Those increases, however, are the result of expanded plantings and favourable weather conditions, as global yields posted a marginal increase of 1%.
Global production for the 2018/19 season is currently projected at 25.9 million tonnes, which would represent a 4% decrease. Global consumption, on the other hand, is currently projected to increase 4% to 27.5 million tonnes.
With global consumption at an all-time high, pressure on stocks is expected to reduce global reserves by 1.6 million tonnes to finish the 2018/19 season at 17.7 million tonnes. Stocks in China are projected to decrease for the fifth consecutive year to 7.5 million tonnes, while stocks outside are expected to remain stable at 10.1 million tonnes.
Sour trade relations between China and the USA show little signs of improving, and could even deteriorate further in the near term, potentially causing major shifts in global trade patterns. China’s 25% premium could prompt the USA, the world’s largest exporter, to seek new markets for its fibre, while other major exporters such as Brazil are expected to fill the void by increasing their shipments to China, the world’s largest importer.
Global production has increased 16% to 26.87 million tonnes in 2017/18, with increases expected from all major producers: India, China, USA, Brazil, Pakistan, West Africa, Turkey, Australia and Uzbekistan. Those increases, however, are the result of expanded plantings and favourable weather conditions, as global yields posted a marginal increase of 1%.
Global production for the 2018/19 season is currently projected at 25.9 million tonnes, which would represent a 4% decrease. Global consumption, on the other hand, is currently projected to increase 4% to 27.5 million tonnes.
With global consumption at an all-time high, pressure on stocks is expected to reduce global reserves by 1.6 million tonnes to finish the 2018/19 season at 17.7 million tonnes. Stocks in China are projected to decrease for the fifth consecutive year to 7.5 million tonnes, while stocks outside are expected to remain stable at 10.1 million tonnes.
| WORLD COTTON SUPPLY AND DISTRIBUTION | |||||||
| 2016/17 | 2017/18 | 2018/19 | 2016/17 | 2017/18 | 2018/19 | ||
| Changes from previous month | |||||||
| Million Tons | Million Tons | ||||||
| Production | 23.08 | 26.87 | 25.89 | 0.00 | 0.23 | -0.05 | |
| Consumption | 24.52 | 26.38 | 27.46 | 0.00 | 0.23 | 0.04 | |
| Imports | 8.12 | 9.08 | 9.47 | 0.00 | 0.08 | 0.14 | |
| Exports | 8.19 | 9.08 | 9.47 | 0.00 | 0.08 | 0.14 | |
| Ending Stocks | 18.80 | 19.29 | 17.71 | 0.00 | 0.01 | -0.08 | |
| Cotlook A Index* | 83 | 88 | 87* | ||||
*The price projection for 2018/19 is based on the ending stocks-to-mill use ratio in the world-less-China in 2016/17 (estimate), in 2017/18 (estimate) and in 2018/19 (projection), on the ratio of Chinese net imports to world imports in 2017/18 (estimate) and 2018/19 (projection), and the average price of 2017/18. Projection reflects 95% confidence interval.
Πηγή: ICAC