The USDA’s first detailed forecast report of world production and consumption for the 2017/2018 growing year show that although global cotton demand is expected to remain strong, increases in production and releases of Chinese reserves could still put downward pressure on prices.
The forecasts released this past month indicate that the global cotton harvest will increase by 7.3 million bales to 113.2 million bales, a 7 percent increase from the 2016/2017 growing season.
“Cotton production is forecast to rise next crop year due principally to stronger cotton prices this winter and spring and weak corn and soybean prices,” Cotton Incorporated Senior Economist Jon Devine told Sourcing Journal. “In the U.S., acreage is expected to expand by 20 percent. Outside the U.S., smaller percentage changes are forecast but growth is predicted for all major cotton growing countries.”
Mill-use is expected to rise by 2.6 million bales, or 2 percent, to 115.8 million bales, resulting in the third consecutive crop year in which consumption exceeds production, although the deficit will be much smaller than in each of the two prior seasons.
Worldwide consumption growth is expected to be the strongest since the 2012/2013 season.
“In terms of demand, economic growth is expected to be the primary driver of the increase next season. Estimates are calling for stronger world GDP growth, and this generally translates to stronger demand for apparel, and therefore stronger demand for cotton,” Devine said.
The USDA’s projections call for the global reduction in stocks to be completely driven by reductions in China, where a tremendous volume of stocks still remains under government control. China is expected to draw its cotton reserves by a formidable 9.1 million bales, or almost 19 percent of its total stock, leaving it with 39.6 million bales by the end of the 2017/2018 season.
China’s cotton imports are expected to total 5 million bales, and mill use is estimated to rise by 500,000 bales to 37.5 million. Mill use is also expected to rise significantly in Bangladesh and Turkey.
Elsewhere in the world, ending stocks are expected to increase, which will put downward pressure on prices.
It is important to keep in mind that these forecasts are very preliminary, and are subject to change due to many factors, including weather, changes in the timing and amounts of Chinese import quota, consumer demand shifts, and changes to government policies in major cotton producing and consuming countries.