After increasing 16 percent to 9.4 million tons in 2014-15, stocks held outside of China are expected to decrease by 4 per cent, to 9 million tons, by the end of 2015-16. Much of the world’s excess stock is held by the Chinese government due to purchases made by the China National Cotton Reserve Corporation under its stockpiling policy from 2011-2014. The reserve made its final purchases of the 2013-14 crop in March 2014 with sales continuing through August 2014, ending with an accumulated volume of around 11.3 million tons. On July 10, the Chinese government started selling its stockpiles at prices close to the current domestic market price in the hopes of maintaining market stability. The cumulative volume of cotton sold through the end of July is around 40,000 tons.
India’s ending stocks are estimated at 2.2 million tons in 2014-15, which is the second largest volume of stocks. Part of the increased volume is held by the Indian government, which procured stocks under its minimum price support program. Government purchases in 2014/15 are estimated at around 1.5 million tons, and sales through the end of July at around 650,000 tons. However, exports from India have fallen by 51 per cent to 980,000 tons, also contributing to the piling up of stocks.
Stocks to decrease in 2015-16
Cotton stocks are expected to reduce in 2015-16 as consumption overtakes production for the first time in five seasons. World production in 2015-16 is forecast down 9 per cent to 23.8 million tons. Output is expected to fall from 2 per cent to 16 per cent in the five largest producing countries. Rising costs of production and a decreased subsidy in China are likely to lead to a 16 per cent drop in production to 5.4 million tons. India’s production is forecast down just 2 per cent to 6.4 million tons due to improved yields from better monsoon weather this season and low prices for competing crops reducing the loss of cotton area. World consumption is projected to rise by 2 per cent to 24.9 million tons in 2015/16. China’s consumption is forecast to remain stable at around 7.7 million tons. However, mill use is expected to grow in the next four largest consuming countries.
World cotton trade is expected to remain stable at 7.7 million tons in 2015-16. In 2015, the Chinese government limited import quota to the volume required under WTO rules of 894,000 tons, in part to spur demand for domestic cotton and Reserve sales. Given the large volume of stocks within China, it will likely maintain the restricted import volumes through 2016, and China’s imports could fall 10 per cent to 1.6 million tons in 2015-16. Imports outside China are forecast to increase by 4 per cent to 6.1 million tons.
