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USDA Cotton: World Markets and Trade


11 October 2012

USDA Cotton: World Markets and Trade - October 2012USDA Cotton: World Markets and Trade - October 2012


USDA Cotton: World Markets and Trade Reports

For 2012/13, global stocks are forecast at a record level for the second consecutive year, causing prices to plummet. However, stocks held outside of China are only marginally higher. In other words, virtually all of the global stocks build-up has occurred in China in response to the government policy to support prices by rebuilding reserves.

Since China is the world’s largest importer, the policy can affect global prices in several ways. For example, purchases of excess domestic cotton, or expanding imports to build reserves takes supplies off the market and supports global prices. Alternatively, China’s reserve policy can depress global market prices by releasing reserve stocks onto the domestic market, which would reduce import demand and cause a larger accumulation of stocks in the rest of the world.

After China’s stocks reached a 20-year low in 2010/11, caused by sharply expanding consumption, China revised its price support policy to producers. Lack of transparency regarding import quotas and release of reserves has contributed to uncertainty in the global market, raising transaction risks for merchants and spinners.

Overview

Global cotton production for 2012/13 is raised, while trade and consumption are lowered. U.S. production is up and exports are reduced marginally to 11.6 million bales. The season average farm price is forecast down at 68 cents/pound.

Prices

The U.S. spot price and the A-Index remained relatively flat pending further developments in China’s reserve policy.

2012/13 TRADE OUTLOOK

Major Exporters:

Australia is up 150,000 bales to 4.35 million on higher 2011/12 production that is carried forward.

United States is lowered 200,000 bales to 11.6 million on reduced import demand in China.

Major Importers:

China dropped 1.0 million bales to 11.0 million on higher production and lower consumption.

The following changes are made, due mainly to rising demand for yarn imports by China:

  • Indonesia increased 100,000 bales to 2.25 million.
  • Taiwan is raised 125,000 bales to 1.0 million.
  • Vietnam is up 150,000 bales to 1.9 million.

Turkey jumped 450,000 bales to 3.45 million spurred by greater domestic use.

Trade Changes 2011/12

Major Importers:

Malaysia is revised down 183,000 bales to 1.0 million.

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