New cotton season 2013/2014 will be the fourth consecutive season in which production will exceed consumption. 2013/14 world production is forecast at 25.6 million tons, while consumption is forecast at 24 million tons. World trade is forecast at 9 million tons, and world ending stocks are forecast at a record 19.8 million tons, or an eye-popping 83% of projected mill use. World production will have exceeded consumption by a cumulative 11 million tons between 2010/11 and the end of 2013/14, resulting in a doubling of world ending stocks in four seasons. Since March 2011, the Government of China has purchased both domestic and imported cotton for its national reserve, estimated at 7.8 million tons as of the end of 2012/13. Total ending stocks in China for 2012/13 are estimated at 9.4 million tons, indicating that stocks held in the private sector were 1.6 million tons. Consumption in China in 2012/13 is estimated at 8.3 million tons, meaning that total stocks cover more than one year of use.The Government of China announced in April 2013 that in 2013/14 it will continue the program ofpurchasing cotton from farmers for the national reserve at 20,400 yuan per ton, a price equivalent to $1.50 per pound, of lint for another season. The national reserve in China is expected to rise to approximately 15 million tons by March 2014, and then auctions will reduce the reserve to about 12 million tons one year from now
Production in China in 2013/14 is forecast unchanged from last season, while production in India may rise a few hundred thousand tons because of a good monsoon and expected good yields. Production in the United States is falling because of dry weather in some states and high prices of maize and soybeans. Pakistan, Brazil, Uzbekistanand most other countries are expected to produce about as much cotton in 2013/14 as they did in 2012/13.
World mill use reached nearly 27 million tons in 2007/08 but is estimated at just 24 million in 2013/14. As of August 2013, polyester prices in China remain more than 20 cents per pound below the Cotlook A Index, undermining cotton’s competitiveness in fiber markets.
The direction of the world cotton industry over the next few years will be determined by policy decisions by the Government of China. Clearly, the current pattern of accumulating stocks cannot continue forever. When Chinastops purchasing for the reserve, cotton prices will fall. If China liquidates the reserve slowly, prices will remain lower for many years. If China liquidates the reserve rapidly, prices will fall rapidly. No one in the industry is sleeping easily these days.