World cotton stocks outside China projected to reach record high, ICAC says. China and India expected to vie for the title of worldΆs largest cotton producer.
Cotton futures bounced from a shallow dip to finish ahead on inside-range price action in benchmark December Wednesday, underpinned by suspected export business.
December settled up 65 points to 65.96 cents, in the upper quarter of its 102-point range from down 16 points at 65.15 to up 86 points at 66.17 cents. Its premium to March widened by 16 points to close at 19 points.
Volume slowed to an estimated 18,200 lots from 23,057 lots the previous session when spreads accounted for 8,100 lots or 35%, and EFP 182 lots. Options volume totaled 368 calls and 1,601 puts.
World cotton stocks outside China are expected to reach a record high this season and pressure prices as China continues liquidating its significant stocks, says the International Cotton Advisory Committee.
In its 2014-15 world supply-demand estimates, converted to 480-pound bales, ICAC raised production 1.93 million from a month ago to 119.65 million and nudged consumption down 600,000 bales to 111.93 million. It pegged world stocks outside China at 44.56 million bales.
This is expected to be the fifth consecutive season in which world production has exceeded consumption, with the margin rising to 7.72 million bales from 5.19 million foreseen a month ago but down from 12.7 million in 2013-14.
The ICAC secretariat expects the Chinese government to maintain sales from the reserve — estimated around 50.5 million bales at the end of August — over the next few years at a pace of 9.2 million to 13.8 million bales a year.
China and India will vie this season for the title of the worldΆs largest cotton producer, ICAC says. Because of the late arrival of the monsoon, the planting season in India was extended and is estimated at 11.8 million hectares or 29.16 million acres, up 1.3% from 2013-14.
Yields based on a three-year average would result in IndiaΆs production declining by 4% to 28.9 million bales.
In response to the ending of government support outside the leading cotton-producing area of Xinjiang, ChinaΆs plantings are estimated to have declined by 8% to 4.2 million hectares or 19.3 million acres. On average yields, ChinaΆs crop would decline to 29.4 million bales.
While world consumption in 2013-14 experienced no growth from 2012-13, itΆs projected to expand by 4% this season.
ChinaΆs mill use could rise to 36.29 million bales from 34.45 million last season, given the fall in both international and domestic prices as well as improved demand overseas for downstream goods. IndiaΆs demand is expected to reach 24.35 million bales, the third season of growth.
World trade is projected to decline about 12% from last season to 36.61 million bales, which is largely accounted for by a 30% decrease in Chinese imports to 9.2 million bales. With bumper crops expected in the United States and India, the two countries will remain the largest exporters.
World prices as measured by the Cotlook A Index are projected by ICAC to average 80 cents this season, down from 85 cents foreseen last month and 90.66 cents in 2013-14. This would be the lowest since 2008-09 when the average was 77.54 cents. The index averaged 74 cents in August.
Futures open interest grew 1,751 lots Tuesday to 176,853, with DecemberΆs down 438 lots to 111,280 and MarchΆs up 1,959 lots to 49,707. Cert stocks declined 3,470 bales to 67,517.
The Cotlook A Index fell 95 points Wednesday morning to 74.35 cents, widening the premium to TuesdayΆs December futures settlement by 31 points to 9.04 cents.
