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ICAC: Record Cotton Stocks Held Outside China

At the end of the current cotton crop season, world ending stocks are projected up 11 percent to nearly 22 million tons, according to an International Cotton Advisory Committee (ICAC) report released Tuesday.

Though China’s ending stocks have seen substantial increased over the previous three seasons, they are expected to stay stable at the end of the 2014-15 season, reaching just over 12 million tons — 56 percent of total world stocks.

Beyond China, ending stocks are forecast to increase for the second consecutive season, going from 7.5 million tons to 9.5 million tons, a 35-year high.

“While the gap between production and consumption has declined since 2011/12, production is projected to exceed consumption by 2.1 million tons in 2014/15 with most of the excess being held by producing countries with exportable surpluses,” according to the ICAC.

China’s production is projected to dip 7 percent to 6.4 million tons.

“While production has also fallen, the volume has been sufficient to meet 80 to 90 percent of demand, particularly as China’s consumption has declined the last four seasons,” ICAC noted. “However, much of the domestic production was absorbed by China’s national reserve, and spinners relied heavily on imports from other producing countries, allowing international cotton prices to remain elevated.”

China ended its reserve policy during this crop season and announced that it would limit imports to the volume outlined under its World Trade Organization (WTO) obligations.

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In Turkey, currently the world’s third largest importer of the commodity, consumption is expected to decline 4 percent to 1.3 million tons as mills outfitted with outdated machinery have been shuttered and cotton’s market share has dipped further owed to the present price attractiveness of synthetic fibers.

Though its acreage is down 4 percent and flooding caused losses, Pakistan’s cotton production is expected to increase 11 percent at 2.3 million tons. Its imports, however, should fall roughly 9 percent to 367,000 tons as the current crop should meet domestic demand.

Declines in imports from China and Turkey will affect the U.S. as the world’s largest exporter, but the ICAC said demand for high-quality machine-picked cotton will help curb export losses.

For the 2014/15 season, U.S. production is estimated at 3.5 million tons, a 25 percent jump from the previous season, and exports are expected to see a modest 2 percent uptick to 2.3 million. Ending stocks in the U.S. are forecast to increase 58 percent to just over 1 million tons.

India, the world’s second largest exporter, should see a significant decrease in exports this season, according to the ICAC, despite a high projected volume of production at 6.8 million tons.

“Consumption is forecast to increase 4 percent to 5.2 million tons while production remains stable, resulting in a smaller exportable surplus. Additionally, demand from China and Pakistan, two of its three largest buyers, has fallen. Ending stocks in India are expected to increase 40 percent to 2.4 million tons in 2014/15 after two season of contraction,” according to the ICAC.