The International Cotton Advisory Committee (ICAC) says after two seasons of relatively tight global stocks, global cotton carryover could rebound to 11.9 million metric tons (MMT) by the end of 2011-12. The group believes around 40% of those stocks are being held in China as the country rebuilds its national reserve.
The group states: "Between October 8 and December 30, 2011, a total of 2.1 MMT of domestic cotton were purchased for the China national reserve. Daily purchases are continuing. There is no limit to the amount of domestic cotton to be purchased by the national reserve this season. In addition, it is reported that about one million tons of non-Chinese cotton has been bought for the reserve; this cotton will be shipped to China over the next few months. Overall, the national reserve, which was almost exhausted by the end of 2010-11, could grow by at least 3 MMT or 11% of 2011-12 global production. It is possible that some of the reserve cotton will be sold later in the season. Outside of China, cotton stocks are expected to grow by 26% to 8.7 MMT in 2011-12, the largest in four years."
Regarding prices, ICAC says the lack of demand for cotton and ample supplies are pressuring prices. The Cotlook A Index dropped from 114 cents per lb. in early August 2011 to 93 cents per lb. in late December 2011. The average Cotlook A Index for the first 5 months of 2011-12 is 109 cents per lb. or a third lower than the 2010-11 full-season average, says ICAC.