The International Cotton Advisory Committee (ICAC) has raised its projection for 2012-13 global cotton carryover to 15.93 million metric tons (MMT), up 740,000 metric tons (MT) from last month and nearly 2 MMT above 2011-12.
The group says mill use continues to decline and is forecast at 23.2 MMT this season. "The policy by the Government of China of maintaining a minimum support price for farmers of approximately $1.40 per pound, and enforcing the minimum price with import quotas and a sliding scale tariff, ensures that mill use of cotton in China will continue to erode," says ICAC. "Mill use in China during 2012-13 is estimated at 8.6 MMT, unchanged from last season but down from a peak of approximately 11 MMT five seasons ago. The loss in mill use of cotton in China is being offset by rising polyester and rayon use, resulting in a rapid decline in cotton’s market share. Mill use of cotton is rising or holding steady in other large countries, including India, Pakistan, Turkey and the United States."
ICAC expects world cotton production to decline by 7% from last season to 25.2 MMT in 2012-13. " The estimate of production in China this season has been raised based on reports of better yield prospects. Production in India is forecast to fall to 5.2 MMT this season based on a state-by-state application of average yields to the estimates of planted area by state. Production in the U.S. is rising after the drought of 2011. The rise in prices of grain and oilseeds will reduce cotton area in Brazil and other countries," it says.
World trade during 2012-13 is forecast at just 7.3 MMT, the smallest in four seasons and 2 MMT less than last season. "It is assumed that China will not continue adding to the state reserve now that stocks in China are approximately 6 MMT," says ICAC.
"With world cotton production 2 MMT greater than consumption, ending stocks are forecast to rise to nearly 16 MMT by July 31, 2013," says ICAC. "The ratio of ending stocks to use outside China is forecast to rise to 0.62, the highest since 1965-66, when it was the United States, not China, that was operating a de facto world cotton buffer stock in an effort to support domestic farmers."