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 International cotton prices are currently supported and stabilized by Chinese policies, but changes to these policies could have opposite results.

04 Dec 2012

WASHINGTON(Commodity Online): Global cotton output in 2013/14 may fall for the second consecutive season resulting in the smallest output in four years. .Lower cotton prices and increased attractiveness of competing crops will decrease the production of global cotton by 11% to 23.2 million tons, according to International Cotton Advisory committee (ICAC).

Production is expected to fall sharply in the United States and Turkey, where competition with grains and soybeans is strong. Smaller crops are also projected in China, Pakistan, Central Asia and Francophone Africa. Production is forecast only slightly down in India, assuming a recovery in the average yield.

Global cotton mill use is expected to continue growing slowly in 2013/14, on the basis of a continued gradual recovery in global economic growth. The Secretariat forecasts global cotton mill use to rise by 3% to 24.2 million tons, driven by South Asia. World cotton trade could remain almost stable at 7.8 million tons, as a projected further drop in Chinese imports could be offset by increased demand from the rest of the world.

After three consecutive years of increase, global stocks could contract by 6% from the record level of 16.6 million tons forecast in July 2013, to 15.6 million tons in July 2014. Most of this reduction in stocks is expected to take place outside of China.

One major source of uncertainty regarding short-term global cotton supply and use projections stems from Chinese policies. The Chinese government has accumulated a national reserve of over 7 million tons in the last 14 months by buying domestic and foreign cotton. This national reserve will likely continue growing until the end of March 2013 but it is not clear how it will be managed after that point. International cotton prices are currently supported and stabilized by Chinese policies, but changes to these policies could have opposite results.


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