Supply and demand situation "face" cotton price trend will be reversed

According to reports, the monthly analysis of the U.S. Cotton Company believes that ICE futures prices continued to fall slowly throughout July, breaking through the 63-68 cent consolidation range for the first time in August. However, the USDA monthly report released subsequently significantly lowered the U.S. cotton output and final inventory in 2015/16, resulting in a sharp rebound in cotton prices, jumping from 62 cents to around 65 cents. Over the same period, the Courtruk A Index fell below 70 cents for the first time since April 2015. Spot prices edged lower in China, India and Pakistan.

The U.S. Department of Agriculture slashed its August forecast for global cotton production and revised historical data for consumption. Globally, global production in 2015/16 was reduced by 2.5 million packets to 0.109 billion packets and consumption was increased by 210000 packets to 0.1146 billion packets. After the adjustment, global ending inventory fell by 2.9 million packages to 0.1052 billion packages. Despite this, global cotton stocks in 2015/16 are still well above historical long-term levels, and the stock-to-consumption ratio is still as high as 92%.

In terms of global production, the largest adjustments include the United States (1.4 million to 13.1 million bales), China (1 million to 26 million bales) and India (500000 to 29 million bales). At the same time, Brazil's output increased by 250000 bales to 7 million bales, Australia's output increased by 200000 bales to 2.2 million bales, Pakistan's output increased by 200000 bales to 10.2 million bales, and Uzbekistan's output decreased by 200000 bales to 3.7 million bales.

From the perspective of global consumption, according to the trade data since 2011/12, Bangladesh's cotton imports and consumption in recent years have been more than 100 million bales higher than the previous forecast. Therefore, the historical data of Bangladesh's consumption have been completely revised. In 2015/16, Bangladesh's consumption increased by 1.1 million packets to 5.7 million packets, China's consumption decreased by 500000 packets to 34 million packets, India's consumption decreased by 250000 packets to 26 million packets, Pakistan's consumption decreased by 100000 packets to 10.9 million packets, and Vietnam's consumption decreased by 100000 packets to 4.7 million packets. Taiwan, China, increased 100000 packages to 925000 packages and Turkey reduced 100000 packages to 6.5 million packages.

The reaction of ICE futures to the USDA monthly report was mainly affected by the sharp adjustment of the US supply and demand forecast. Judging from historical experience, it is not uncommon for USDA to significantly adjust US production and demand data in its August forecast, because the forecast basis for July and August is completely different. From May to July, USDA's new annual forecast is based on data statistics and analysis, while in August, yield and output forecasts are based on field surveys of cotton fields. In 2015, many cotton-producing states in the United States had heavy rainfall, and there was great uncertainty in cotton planting area, abandonment rate and yield per unit area. Therefore, the forecast obtained by field survey in August changed greatly.

According to the USDA's August forecast, the actual cotton sown area in the United States will be reduced by 100000 acres to 8.9 million acres in 2015, and the abandoned area will be increased by 500000 acres to 1 million acres, with the average yield falling by 3% month on month. The above adjustments led to a reduction of 1.4 million bales, or 10%, in the US cotton production forecast. As a result of the sharp reduction in production forecasts, US cotton exports and ending inventories were reduced in 2015/16. In 2014/15, the US cotton export forecast increased by 200000 bales to 11.2 million bales, resulting in a drop of 500000 bales in ending inventory. In 2015/16, the US cotton export forecast was cut by 800000 bales to 10 million bales due to a sharp cut in the US cotton production forecast. The above situation shows that the tight supply of cotton in the United States may become a factor supporting cotton prices in 2015/16.

http://www.twwtn.com/Agriculture/58_288614.html Science and Technology World Network