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.


 


Based on China’s 2012/13 cotton estimates, consumption at 8.3 million tons, ending stocks at 9.4 million tons, of which 7.8 million tons are in the national reserve, total stocks cover more than one year of use, but the stocks held in the private sector are equivalent to a little more than two months of use.  As the Chinese government had announced that the program of purchasing cotton from farmers for the national reserve at 20,400 yuan per ton will continue for the 2013/14 season, its national reserve 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.  Accordingly, of the estimated world ending stocks of about 20 million tons expected in 2013/14, only 8 million will be available for commercial use, and only 6 million will be held outside China. Based on an expected tightening of stocks outside China relative to use outside China, a rise in the season average Cotlook A Index from 88 cents per pound in 2012/13 to more than one dollar in 2013/14 is forecast.


 


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 season. Production in the United States is falling because of dry weather in some states and high prices of maize and soybeans. Pakistan, Brazil, Uzbekistan and most other countries are expected to produce about as much cotton in 2013/14 as they did in 2012/13.


 


World mill use 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 cottonΆs competitiveness in fiber markets. The largest decline in mill use will be in China itself, nearly 3 million tons, since 2007/08, while mill use in the rest of the world is expected to increase by 200,000 tons. The direction of the world cotton industry over the next few years will be determined by policy decisions by the Government of China. 

 


* The price projection for 2013/14 is based on the ending stocks/consumption ratio in the world-less-China in 2011/12 (estimate), in 2012/13 (projection) and in 2013/14 (projection), on the ratio of Chinese net imports to world imports in 2012/13 (estimate) and 2013/14 (projection), and on the average price of 2012/13.

95% confidence interval: 89 to 131 cents per pound.