The world’s cotton production is set to decrease for the fourth consecutive season, and a decline in cotton stocks is expected as mill use has exceeded production.
In the United States Department of Agriculture’s (USDA) latest Cotton and Wool Outlook, global cotton production for the 2015/16 season was projected to decline 6 percent from this season to 111.3 million bales.
India is expected to be the leading producer next season and is forecast to produce 29.5 million bales—26.5% of global cotton production.
China’s production is expected to decrease 10 percent to 27 million bales as area keeps trending lower. USDA projects that the country’s area will be 16 percent lower than the current season at roughly 3.7 million hectares.
“The national yield, however, is projected to rise to a record as area continues to shift to the higher yielding Xinjiang region,” the report noted.
Global cotton mill use, on the other hand, is expected to increase 3 percent from the present season to 115.3 million bales as lower cotton prices stimulate demand.
“If realized, mill use would be the highest since 2010/11’s 115.6 million bales,” USDA noted.
China and India are still the world’s biggest cotton consumers, with a combined mill use of 62 million bales, more than 53 percent of the global total. China’s cotton consumption should reach 36 million bales in 2015/16, up from 35 million this season and India’s, which USDA says will tick up 5 percent, should reach 25.8 million bales.
World ending stocks are projected at 106.1 million bales for 2015/16, a 3.5% dip from this season and the first time since 2009/10 that projections indicate a decrease.
“Global cotton stocks have risen dramatically over the last several seasons, largely the result of growth in China’s stocks. Government policies in China supported national reserve purchases of domestic cotton and, at the same time, significant raw cotton imports; these policies strengthened global cotton prices by keeping China’s supplies out of the marketplace and encouraged production in other foreign countries.,” USDA noted.
China announced last week it would start selling of its stockpile of cotton and a plan for the reserve release is expected in the coming days.
The country’s policy adjustments are expected to slightly reduce stocks to 62.6 million bales, and its share of world stocks should remain flat.