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World Cotton Production to See Significant Drop in 2015/16

World cotton projections for the 2015/16 season show lower production, lower consumption and lower ending stocks, largely owed to China’s reduced demand.

The United States Department of Agriculture’s (USDA) latest World Agricultural Supply and Demand Estimates, showed global production reduced by a sizeable 1.9 million bales. Production reductions in Pakistan (down 1 million bales), China (down 700,000) and the U.S (down 250,000) were partially offset by an uptick in Australia (up 300,000).

U.S. crop is forecast at 13 million bales, due mainly to lower production in North and South Carolina, the USDA reported. Domestic mill use will remain unchanged, but export projections were lowered 200,000 bales based on “lower available supply and lagging sales to date.”

Projected world trade was raised 1 million bales on larger expected imports from Pakistan (up 700,000 bales), Vietnam (up 350,000 bales) and Bangladesh (up 200,000 bales).

In its monthly economic newsletter, Cotton Incorporated said, “For Pakistan, the increase in import expectations was a result of the lower production forecast, where seed cotton arrivals have been slow and there have been yield-based concerns stemming from adverse weather conditions and pest infestations. For both Vietnam and Bangladesh, countries without significant cotton production, the increases in imports are a reflection of growth in spinning in those countries.”

The forecast average price range for the marketing year of $0.56 to $0.62 was narrowed $0.01 on each end with an unchanged midpoint of $0.59.

According to Cotton Inc.’s outlook, USDA forecasts have been steadily lowered since initial projections in May. World production was originally forecast at 111.3 million bales and the current estimate is 103.7 million. World mill use was forecast at 115.5 million bales and now that estimate is a lower 111.4 million.

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In terms of both production and consumption, China has seen the largest country-level reductions.

“Relative to peak in 2007/08, Chinese production in 2015/16 is down by more than a third,” Cotton Inc. said in its letter. “The steep 5.7 million bale decrease this crop year (from 30.0 to 24.3 million), allowed India (28.5 million) to surpass China as the world’s top producer, a title that China had held without interruption for three decades.”

China may still be the world’s largest spinner of cotton, but mill use has taken a hit and consumption since the 2007/08 season has also decreased by more than one-third.

“Lower levels of Chinese consumption can be expected to slow the process of drawing down Chinese stocks. With statements from Chinese officials indicating that the reduction in reserve supplies would involve lower levels of import quota, an implication for the global market is that Chinese import demand could be expected to remain at lower levels for several years,” Cotton Inc. said. “Following this month’s revisions, China is expected to import only about one fifth of the cotton it brought into the country in 2011/12 (24.5 million bales) and it is predicted that Bangladesh will surpass China as the world’s biggest importer.”

World ending stocks, according to the USDA’s estimates, are 1.7 million bales fewer than last month at 104.4 million.