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Global Cotton Production Continues to Recover

World cotton production is expected to grow for the second consecutive year after a significant decline in the 2015-16 crop season.

The International Cotton Advisory Council forecast world cotton production to grow 7 percent to 24.6 million tons in 2017-18. In the 2016-17 crop season, world cotton production was 22.9 million tons.

In 2015-16, world cotton production declined by 19 percent to 21.3 million tons, which was the lowest volume since 2002/03. This was a result of a 9 percent contraction in area due to low cotton prices and a 10 percent fall in the world average yield, ICAC noted.

World cotton area is projected to expand 7 percent to 31.8 million hectares, which remains below the average of 32.3 million hectares of the previous 10 years despite prices above their long-term average.

[Read more on cotton prices: Supply Chain Foundation Stable, But Uncertainty Lurks]

India will likely be the world’s largest producer for the third consecutive season with production growing 6 percent to 6.1 million tons. An early and adequate monsoon, a higher minimum support price and the prospect of better returns from cotton compared to competing crops have encouraged farmers in India to expand area 8 percent to 11.3 million hectares, ICAC said.

Cotton area in China is expected to expand 3 percent to 3.2 million hectares due to high cotton prices and the new subsidy announced during the planting season. Assuming an average yield of 1,558 kilograms per hectare, production could increase to 5 million tons.

Production in the U.S. is forecast to increase 12 percent to 4.2 million tons, which would be the largest volume since 2007-08. High prices, sufficient soil moisture in dryland areas and beneficial weather during planting is driving the increase in area and production.

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After two seasons of decline, cotton area in Pakistan is projected to grow 8 percent to 2.7 million hectares. Production could reach 2 million tons, assuming an average yield of 741 kilograms per hectare, up by 11 percent from 2016-17.

World cotton consumption is expected to increase 2 percent to 24.7 million tons based on expectations of growth in the global economy. China leads as the world’s largest consumer of cotton, though its mill use remains unchanged from 2016-17 at 7.7 million tons. High domestic and international cotton prices and constrained supply are likely to limit any growth.

After a 3 percent decline last season, India’s consumption is forecast to recover 3 percent to 5.3 million tons. Pakistan’s consumption is expected to increase 3 percent to 2.3 million tons. Mill use in Bangladesh and Vietnam is forecast to rise 5 percent to 1.5 million tons and 7 percent to 1.3 million tons, respectively.

The U.S. is expected to continue as the world’s largest exporter of cotton in 2017-18 despite a projected 7 percent reduction in exports to 2.9 million tons. This is due largely to a much larger supply of cotton from other countries on the global market compared to 2016-17. As a result, U.S. share of world exports is expected to fall to 37 percent in 2017-18 from 50 percent in 2016-17.

After declining 28 percent to 900,000 tons in 2016-17, exports from India are projected to rise 2 percent to 930,000 tons. While imports in China will likely be limited by quota, they are projected to increase 1 percent to 1.1 million tons. Imports by Bangladesh are expected to increase 7 percent to 1.5 million tons and Vietnam by 8 percent to 1.3 million tons.

World ending stocks are forecast to decline 1 percent to 17.1 million tons in 2017-18. China’s stocks are expected to decline 18 percent to 7.6 million tons and its share of world stocks is expected to decline to 44 percent, which would be the first time since 2011-12 that it held less than half of global stocks. Stocks held outside of China are expected to rise 17 percent to 9.6 million tons. ICAC noted that this would be one of the highest volumes on record and indicates that prices should fall.