According to a report released by the International Cotton Advisory Committee (ICAC), the Type 328 China Cotton Index-a daily index of prices for domestic cotton offered to mills in China fell from this season's nine-month average of 144 cents per pound to about 129 cents per pound as of the end of April. China’s mills may welcome the lower cotton prices, but world cotton production is being forecasted to get negatively affected by a change in China’s cotton policy. As per ICAC, the government’s cotton policy has done considerable damage to the industry in recent years.
The report pointed out that since the start of its reserve policy in 2011, mill consumption declined by 17 per cent, from 9.6 million tons in 2010-11 to 7.9 million tons in 2013-14. In 2014-15, the decline in consumption in China is expected to slow, falling by just 1 per cent to 7.8 million tons. But consumption in India, Pakistan and Turkey—the next three largest consumers of cotton—is expected to grow in the 2014-15 season. World consumption in 2014-15 is expected to reach 24.3 million tons, a 3 per cent increase over the previous season. Despite the increase in world mill use, production is expected to decline 2 per cent to 25.2 million tons, narrowing the gap between production and consumption.
The report notes that most of the decline in world production will take place in China, where production is expected to decline by 10 per cent from 6.7 million tons in 2013-14 to 6 million tons in 2014-15. As the Chinese government has restricted its support for cotton to just the Xinjiang region, area outside is expected to fall significantly. India is forecast to produce nearly 6.3 million tons in 2014-15, which is a dip of 2 per cent due to expectations that monsoon weather will not be as favorable as it was in the 2013-14 season. World trade is expected to drop to 8.2 million tons in 2014-15 from the 8.7 million tons forecast for 2013/14.
However, the report further adds that China’s decline in cotton production will be partially offset by imports from Bangladesh, Indonesia, and Vietnam, which are expected to import a total of 2.4 million tons in 2014-15, an increase of 13 per cent.