ICAC forecasts higher cotton price on lower Chinese ending stocks

16.11.2016

The International Cotton Advisory Committee nudged higher forecast for cotton prices amid ideas that world stock will decrease further than had been thought, fuelled by China's stocks selldown.

The committee raised by 1 cent to 74 cents a pound its estimate of average world cotton prices in 2-16-17, as measured by the Cotlook A index of physical values.

Last year's price of cotton was 70 cents a pound, while it was 71 cents a pound in 2014-15.

The revision came as the ICAC cut its estimate for world stocks at the close of 2016-17 below 18m tonnes, to the lowest in five years.

Lower ending stocks

Stocks will close this season at 17.78m tonnes, the committee said, cutting its forecast by 320,000 tonnes.

The downgrade - which took the figure further below the 19.14m tonnes at which they closed last season, let alone the 2014-15 record high of 22.2m tonnes – reflected in a part a 140,000-tonne reduction in expectations for world cotton output this season.

However, the ICAC also stressed China's success in selling down its state stockpiles in the auction programme which ran until September, and is expected to resume in March.

"The Chinese government sold over 2m tonnes from its official reserves from May through September," the ICAC said.

"Stocks in China are expected to decline by 15% to 9.6m tonnes by the end of 2016-17," the lowest in five years.

China's stocks hit a record high of 12.9m tonnes in 2014-15.

Chinese imports to revive

China's cotton imports in 2016-17 are forecast reviving by some 20,000 tonnes to 980,000 tonnes – the first increase in at least five years, helping a recovery in world trade too.

However, Bangladesh, which overtook China in imports last season, will retain top rank, and is "projected to increase its volume of imports by 10% to 1.2m tonnes, while imports by Vietnam are expected to rise by 15% to 1.1m tonnes", the ICAC said.

"Exports from the US are expected to rise by 26% to 2.50m tonnes, as the abundant crop this season will provide a large exportable surplus," the committee added.

Still, the US export forecast is below the US Department of Agriculture's estimate of 2.61m tonnes, despite near-identical output estimates, at 3.5m tonnes.
    

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