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Global Cotton Stocks to Decline for First Time in 6 Years

Global cotton stocks in the 2015/16 season are set to fall for the first time since the 2009/10 season as most of the world’s cotton-producing countries are responding to lower prices.

The United States Department of Agriculture’s (USDA) latest World Agricultural Supply and Demand Estimates reported released Tuesday noted that higher beginning cotton stocks compared to last season are offset by “sharply lower world production” because of the price declines.

World consumption projections were raised 3.5% namely owed to positive global economic growth and the delayed effect of declining cotton prices. World trade was reduced slightly because China’s sharp drop of 1.7 million bales in imports is offset by other country’s increases.

“China’s lower production and imports, combined with a consumption increase of nearly 3 percent, are projected to reduce ending stocks by about 3.0 million bales, accounting for more than three-fourths of the decline in world stocks,” the USDA report noted. “Despite this reduction, world stocks of 106.3 million bales would still be the second highest on record.”

For the current season, U.S. production was raised marginally because of lower harvested area and higher yields, and Argentina, China, Benin will see slightly higher world ending stocks, which will be partially offset by decreases in India, Malaysia and Brazil.

U.S. cotton projections for the 2015/16 season include slightly higher supply compared to the 2014/15 season. The 2 million-bale increase in beginning stocks will be mostly offset by an 11 percent decrease in production because of reduced planted area, USDA reported.

Domestic mill use is projected higher, though exports are flat to the previous season’s 10.7 million bales. The market year average price producers receive is forecast to range from $0.50 to $0.70 per pound, with the $0.60 midpoint, the same as the current season.