Turkey to see decline in cotton production

13 Jun '08

3 min read

But it is not just here in the US where production expectations are being scaled back. A report out of China seems to indicate that its production may be smaller then the USDA number of 35.5 mio bales for 2008/09. According to Cottonchina, acreage will be down by about 4% from last season, with the biggest reductions occurring in Xinjiang and Henan. Cottonchina estimates output at around 7.2 mio tons or 33 mio bales, which is 2.5 mio bales below the USDA number.

Another big importer of US cotton, Turkey, will see its production decline as well, with current estimates pointing to a crop of just 2.6 mio bales, or around 0.6 mio bales less than in 2007/08. Overall the USDA report showed world production for the coming season at 116.4 mio bales, down 3.6 mio bales from the current season.

Surprisingly, the USDA showed a small increase in its world consumption number to 127.2 mio bales, which even after taking out the 'loss adjustment' of 3.0 mio bales would still amount to a healthy 124 mio bales. This estimate seems a bit optimistic to us, but what if it were right?

Even though we keep hearing a lot of pessimism in regards to consumers' ability to spend, particularly in the US and Europe, statistical evidence has so far failed to confirm these fears. Sure, the growth rate of consumption has slowed down considerably, but it is still positive, with 4 out of the last 5 months showing an increase.

In May, US retail sales rose a stronger than expected 1.0%, with clothing stores showing a 0.5% increase. Considering that retail sales in China and India are still growing between 15 and 20%, it is possible that the market is underestimating consumption.

Continued...

Plexus Cotton Limited

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