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China cotton policy impacts mill consumption – ICAC
02
May '14
Since the beginning of April when the Chinese government announced a lower starting auction price, the pace of sales from China’s reserve increased and the Type 328 China Cotton Index (a daily index of prices for domestic cotton offered to mills in China) fell from this season’s nine-month average of 144 cents/lb. to about 129 cents/ lb. by the end of April.
 
Although lower cotton prices are welcomed by the mills in China, a lot of damage has been done to the industry in the past few years by the Chinese government’s cotton policy. Since the start of its reserve policy in 2011, mill consumption has declined by 17%, from 9.6 million tons in 2010/11 to 7.9 million tons in 2013/14. In 2014/15, the decline in consumption in China is expected to slow, falling by just 1% to 7.8 million tons. However, the next three largest consumers, India, Pakistan, and Turkey are all expected to see growth in their mill use in 2014/15. World consumption in 2014/15 is expected to reach 24.3 million tons, an increase of 3% in comparison with the previous year.
 
While world mill use is expected to increase in 2014/15, world production is forecast to decline by 2% to 25.2 million tons, narrowing the gap between world production and consumption. In 2014/15, India is expected to produce nearly 6.3 million tons, which is a decline of 2% due to the expectation that the monsoon weather will not be as favorable as in 2013/14. 
 
Most of the decline in world production will occur in China, where production is expected to decline by 10% from 6.7 million tons in 2013/14 to 6 million tons in 2014/15. As the Chinese government has restricted its support for cotton to just the Xinjiang region, area outside is expected to fall significantly.
 
World trade is expected to decline in 2014/15 to 8.2 million tons from 8.7 million tons forecast for 2013/14. As with production, this decline stems mostly from China, where imports in 2014/15 are expected to be 2.2 million tons, down by 30% from 2013/14 and 60% from its peak of 5.3 million in 2011/12. However, China’s decline will be partially offset by imports from Bangladesh, Indonesia, and Vietnam, which are expected to import a total of 2.4 million tons in 2014/15, an increase of 13% from 2013/14.
 
The International Cotton Advisory Committee is an association of governments of cotton producing and consuming countries. The Secretariat of the Committee publishes information related to world cotton production, supply, demand and prices, and provides technical information on cotton production technology.
 

International Cotton Advisory Committee


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