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2016 challenging year for US cotton industry: NCC
10
Feb '16
2016 will be a challenging year for the US cotton industry, with low cotton prices, ample global stocks and uncertainties regarding global mill cotton use, an economist at National Cotton Council (NCC) said.

Speaking at NCC's AGM, Dr. Jody Campiche, NCC's vice president said, “While world mill use is expected to exceed world production in 2016, global cotton stocks remain at high levels."

As per a NCC press release, regarding domestic cotton mill use, USDA estimates US mill use at 3.6 million bales, up 25,000 bales from 2014 and marking the fourth consecutive year of increased consumption.

Dr Campiche said export markets continue to be the primary outlet for US raw fibre and that in recent years, US export customers have changed, while China is importing less cotton, leading to a reduction in world trade.

Although US exports to China have been declining since 2012, drastic reductions have occurred in the 2015 marketing year.

As a result, NCC estimates 2015 US exports at 9.5 million bales, down 15.5 per cent from 2014 and below the most recent USDA estimate.

“The current estimate may prove to be a bit optimistic as the weekly pace will need to increase throughout the remainder of the marketing year to reach 9.5 million bales,” she observed.

Campiche further said that considering the massive stockpiles of cotton and expectations for limited quota, China's imports are expected to fall further in 2016 to 4.75 million bales, down from 5.5 million in 2015.

China's mill use too is projected to decline in 2016 and although its internal cotton price has declined, it is still almost twice the level of polyester prices as those prices also have weakened.

India is projected to continue as the world's largest cotton producer and the second largest exporter in 2016.

Campiche projects US off-take of 13.8 million bales in 2016, leading to an increase in ending stocks of 193,000 bales.

“Although world cotton stocks are projected to decline by 6.3 million bales in 2016, the reduction is not large enough to significantly reduce global inventories that begin the year at 103 million bales,” Campiche noted.

She added that while projections of global consumption exceeding production normally would be supportive of prices, the implications for the coming year may not be as clear cut.

The majority of the decline in global stocks is due to reduced inventories in China and an aggressive approach by China to reduce stocks would have bearish implications for world prices. (AR)

Fibre2Fashion News Desk – India

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