This season, global cotton trade and prices are affected to a large extent by government policies in China and by policies in India.
On the one hand, China accumulated over 3 million tons of domestic cotton and at least one million tons of foreign cotton in its national reserve during the first eight months of 2011/12. This accumulation boosted imports by China, which are now forecast at 4.2 million tons or up by 61% from last season and accounting for half of 2011/12 world imports.
On the other hand, the Indian government imposed a sudden ban on exports starting on March 5, 2012 after seeing their exports jumping during the first half of 2011/12 (a large part going to China). The ban initially included already registered contracts, but it was later announced that it excluded them. Indian cotton exports between August 2011 and the end of February 2012 were estimated at 1.6 million tons. It is unclear how long the ban will last.
Global cotton trade is expected to rise by 9% to 8.6million tons in 2011/12, the largest volume in four years, driven by near record imports from China. Exports from the United States are down 25% to 2.3 million tons due to reduced exportable supplies, whereas exports from India, Brazil and Australia could reach record levels (of 1.6 million tons, 900,000 tons and 860,000 tons, respectively).
With global production exceeding global consumption in 2011/12, global stocks are expected to rebound by 41% to 13.1 million tons in 2011/12.
Cotton plantings for 2012/13 started in March 2012 and are now progressing in many countries of the northern hemisphere. World cotton area is expected to decrease by 7% to 33.6 million hectares in response to lower prices. However, the reduction in cotton area is modest relative to the extent of the fall in prices since last year (the average Cotlook A Index was down by 57% in March 2012 compared to March 2011). Higher-than-average cotton prices, weather, and support price policies are the main factors preventing a sharper drop in cotton area in 2012/13. Cotton area will even increase in some countries. Based on average yields, world production could decline by 6% to 25.5 million tons.
After two seasons of decline, global cotton mill use is projected to increase by 4% to 24 million tons in 2012/13, driven by improving economic growth and lower cotton prices. Production will exceed consumption again, and global cotton stocks could rise to 14 million tons, or 61% of global mill use.