The US is the largest exporter of cotton, accounting for 29 per cent of global exports. Exports for 2016-17 is forecasted to increase 53 per cent year-on-year. This is mainly driven by higher demand from Taiwan and China.

As a result, the US share of global cotton exports is set to reach 39 per cent, the highest level seen in six years. Prices shot up in July after Chinese cotton stocks were forecast to fall by 1.9 million tons y-o-y to touch 11.3 million tons in 2016-17, raising concerns over low supply. These speculations caused panic buying in the market, which saw prices rise. In fact, Chinese cotton stocks have been revised down further, currently forecast at 10.7 million tons, down 15 per cent y-o-y.

For the upcoming 2017-18 season US cotton planted area is expected to rise by over 20 per cent y-o-y. As long as the weather remains favorable, production would be expected to rise. This is the second consecutive year that global ending stocks have fallen. Ending stocks are forecast down six per cent y-o-y for the current 2016-17 season and down 19 per cent since the 2014-15 season. This is mainly driven by reduced ending stocks in China, as well as global consumption outweighing production.