What is in this article?:
- Cotton outlook will be influenced by China’s policy decisions and continued competition from man-made fiber (MMF).
- The 2012 U.S. retail cotton market fell to the lowest level since 1996, amid a 4th consecutive year of declining market share.
- Loss in market share is the result of cotton prices that have been uncompetitive with polyester.
After consecutive declines, cotton demand has stabilized and is expected to grow in the coming year. However, the battle for market share with man-made fibers has never been fiercer. With a recovering global economy, there is excellent potential for growth in cotton demand. However, that full potential will not be realized as long as China continues to operate their current policy in a manner that stifles cotton demand.
NCC economists assume for 2013 that China will continue to build government reserves, holding 38.8 million bales on July 31, 2014. In order to supply projected mill use of 34.3 million bales, China would import 6.8 million bales, which includes the WTO-required quota of 4.1 million bales. Under this scenario, total imports for the 2013 marketing year are slightly more than half the import level for the current marketing year.
Reduced imports by China are only partially offset by increased imports in other countries, leading to a decline in world trade from 38.9 million bales to 36.0 million bales. With a reduction in exportable supplies, the United States is projected to see a decline in exports for the 2013 marketing year, down 1.6 million to 10.6 million bales. When combined with mill use of 3.5 million bales, total use of 14.1 million bales exceeds the U.S. crop by 1.2 million bales. Ending stocks for the 2013 marketing year fall to 3.6 million bales, giving a stocks-to-use ratio of 25 percent.
Outside of China, mill use is expected to increase in 2013 while production is expected to decrease. The relative balance between production and use causes world stocks outside of China to decrease by 4.4 percent to 39.3 million bales by the end of the 2013 marketing year.
Additional details of the 2013 Cotton Economic Outlook are on the NCC’s website at http://www.cotton.org/econ/reports/annual-outlook.cfm.