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No end in sight to global cotton glut
Aug '15
The glut in the global cotton stocks is expected to continue in 2015-16, says the International Cotton Advisory Committee (ICAC). In 2014-15, world ending stocks are estimated to have risen by 9 per cent to 22 million tonne, reflecting a stock-to-use ratio of 90 per cent, the ICAC said in a press release.

From 2010-11 to the end of 2014-15, the world has accumulated 13.4 million tonnes of stock due to production exceeding consumption. In 2015-16, stocks are projected to decrease 5 per cent to just under 21 million tonne, reducing the excess volume by around 1 million tonne. After increasing 16 per cent to 9.4 million tonne in 2014-15, stocks held outside China are expected to decrease by 4 per cent, to 9 million tonne, by the end of 2015-16.

Much of the world's excess stock is held by the Chinese government from purchases made by the China National Cotton Reserve Corporation under its stockpiling policy from 2011-2014. The Reserve made its final purchases of the 2013-14 crop in March 2014 with sales continuing through August 2014, ending with an accumulated volume of around 11.3 million tonne. On July 10, the Chinese government started to sell its stockpiles at prices close to the current domestic market price in the hopes of maintaining market stability. The cumulative volume of cotton sold through the end of July is around 40,000 tonne.

India's ending stocks are estimated at 2.2 million tonne in 2014-15, which is the second largest volume of stocks. Part of the increased volume is held by the government-owned Cotton Council of India (CCI), which procured stocks under its minimum price support programme. Government purchases in 2014-15 are estimated at around 1.5 million tonne, and sales through the end of July at around 650,000 tonne. However, exports from India have fallen by 51 per cent to 980,000 tonne, also contributing to the buildup of stocks.

Stocks in 2015-16 are projected to decrease as consumption overtakes production for the first time in five seasons. World production in 2015-16 is forecast 9 per cent lower to 23.8 million tonne. Output is expected to fall from 2 per cent to 16 per cent in the five largest producing countries. Rising costs of production and a decreased subsidy in China are likely to lead to a 16 per cent drop in production to 5.4 million tonne. India's production is forecast at just 2 per cent lower at 6.4 million tonne due to improved yields from better monsoon this season and low prices for competing crops reducing the loss of cotton area.

Global consumption is projected to rise by 2 per cent to 24.9 million tonne in 2015-16. China's consumption is forecast to remain stable at around 7.7 million tonne. However, mill use is expected to grow in the next four largest consuming countries.

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