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ICAC Sees Troubled Waters for Global Cotton Production

The International Cotton Advisory Council is warning that a continued decrease in world cotton production combined with unfavorable weather conditions in the U.S. and China could lead to “quality gaps” in next season’s cotton supply.

The ICAC said in a new report that world cotton production is estimated at 26.6 million tons for the current 2017-18 crop season, while world mill use is projected at 25.5 million tons, which represents the third consecutive season of growth in demand for cotton. As a result, ICAC projected world ending stocks to decrease to 18.3 million tons, representing the fourth consecutive season of diminishing global reserves.

Much of the decline occurs in China, where stocks at the end the 2017-18 season were projected to be down to 8 million tons. ICAC forecasts stocks held outside of China to increase to 10.3 million tons, the fourth consecutive season for higher stocks outside of China.

However, ICAC said, “Along with weather issues in the Xinjiang region, which represents 75 percent of China’s cotton area, and potential drought conditions in West Texas affecting 25 percent of the U.S. crop, there may be concern of quality supply gaps which may affect next seasons supply.”

ICAC projected world cotton consumption to increase to 26.7 million tons in 2018-19, while it estimated world cotton production at 25.7 million tons in the season. Production in China is projected to decrease to 5.6 million tons next season based on reduced planting area, while consumption is forecasted to increase to 8.4 million tons.

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ICAC forecasts U.S. production to decline to 4.2 million tons, with exports projected to increase 3 percent to 3.3 million tons in 2018-19. Reduced yields in 2017-18 in India are contributing to lowered planted area for next season, with exports projected at 840,000 tons, representing a 24 percent falloff from the previous season.

Production in Brazil for the current season was estimated to be 1.9 million tons, a 26 percent increase from 2016-17, with 900,000 tons projected for export. Production for the West Africa region in this season was projected at 1.2 million tons, representing a 13 percent growth from the previous season, with exports for the region expected at 1.04 million tons.

All this leads to a projection of 83 cents per pound for Cotlook A index for the current season, staying flat on average with last season. For 2018-19, ICAC forecasts a decline to 81 cents a pound for the global index. Spot prices in the U.S. averaged 87.17 cents per pound for the week ending May 31, according to the U.S. Department of Agriculture. This is the highest weekly average since week May 2014 when the average was 86.53 cents. The weekly average was up from 82.94 cents per pound the prior week and from 74.56 cents a year earlier.