US officials forecast world cotton demand to outstrip consumption for the third year in a row, as the Chinese government continues to draw down its massive stocks.

The US Department of Agriculture's latest cotton outlook, which gives its first views on supply and demand 2017-18 season, sees consumption exceeding demand by 6.0m bales.

All of this decline was down to China, were stocks are seen falling by 9.1m bales despite rising imports and domestic production.

And the USDA said that the decline in Chinese stocks could set the stage for larger imports in the season to come.

Rising consumption

"China's production is projected to rise for the second consecutive season, as production in the east has largely stabilized and Xinjiang production continues to grow," the USDA said.

And the USDA saw Chinese imports up 500,000 bales year on year, at 5.0m bales.

But the rising production and imports will not be enough to stem the decline in stocks, to 22.0m bales, their lowest level since 2011-12.

Chinese cotton consumption is seen at 37m bales, a six-year high and the third consecutive year of growing demand.

Could imports get a boost?

"Assuming similar patterns of reserve sales in 2017 and 2018 to 2016, the China reserve could fall to just over 40% of its peak of 53m bales by the end of 2017-18."

"Declining reserve stocks might set the stage for a more liberal China import policy in 2018-19," the USDA said.

Globally, the USDA saw 2017-18 world cotton demand outstripping supply for the third consecutive year, drawing down world stocks down by another 6.0 bales.

But despite tightening stocks, the USDA forecast cotton prices to fall by around 5 cents, to 77 cents a pound "due to projected higher stocks outside of China".

China leads stocks decline

Separately on Friday, Cotlook also forecast world stocks to decline, but by a smaller amount.

Production was seen up thanks to "increased expectation of planted area in some of the major producing countries, including India, Pakistan and the US".

But as with the USDA, Cotlook saw falling stocks in China outweighing rising stocks elsewhere.

Chinese stocks were seen falling by 2.4m tonnes, causing global stocks to fall by 693,000 tonnes, or 3.2m bales.

May cotton futures were up 0.5% in midday deals in New York, at 76.45 cents a pound.