Cotton Stocks Accumulating Everywhere Outside of China

Global cotton stocks outside of China are expected to rise by nearly 12 million bales to a record 53 million bales in 2017-18 season, predicts the US department of agriculture (USDA). Despite a relatively strong forecast of 3.8 per cent increase in global cotton use, a 15 percent expansion in production will outpace demand, increasing global stocks.

“China’s cotton import policy remains a major wildcard. Despite market rumours of possible increased import access, there has been no official indication of any change in the import policy. Therefore, 2017-18 imports are forecast at a similar level to last season,” states October 2017 report on cotton released by the Foreign Agricultural Service of the USDA.

While the additional cotton stocks will be spread across nearly all markets, the exact burden will vary substantially. Major exporters will bear the brunt of the burden of high stocks, with Central Asia, Africa, the Southern Hemisphere, and the US all forecast to have stock levels well above recent averages.

In South Asia, cotton stocks are projected to grow as production increases three times as much as the region’s growth in use. Stocks throughout the region will be at unusually high levels, particularly in India, the major exporter. “If Bangladesh is able to repeat past peak growth rates, it could reduce some of these stocks; however, USDA’s forecast already assumes a relatively high growth rate for use and is unchanged this month,” the report states.

Cotton stocks-to-use ratios will be above recent levels even in import-dependent regions such as Southeast Asia. As exporters work aggressively to reduce burdensome stock levels, buyers have opportunities to procure cotton at competitive prices, resulting in some of the increased global stocks being held in mills, warehouses, and other destination-country sites, according to the report.