Cotton prices fell by almost 2 percent in March, according to the latest data from the Agriculture Department.
The seven-market U.S. average cotton spot price dropped by 1.9%, or $0.012, to $0.6171 per pound, as slight increases in global supply projections and expected reductions in demand in the current season impacted prices.
World cotton stocks are projected to reach a new record by the end of the current season, rising 8.2% to 110.1 million bales, partly due to a 200,000 bale increase expected in Pakistan.
Global cotton mill use for 2014-2015, on the other hand, is forecast to rise by less than 2 percent above last year, to 111 million bales, less than previously thought. The largest change in projected demand was for China, which was lowered by more than one million bales to 35 million. Although China has started to release large portions of the cotton reserves it stockpiled during the buying program in place for several years to support prices, the expected increase in demand for cotton by Chinese mills has not materialized. The country is expected to import 7.3 million bales of cotton in the current crop year, a little over half last-year’s level.
India, the world’s second largest exporter after the U.S., recently surpassed China in cotton production as acreage there remains stable to slightly up. India’s acreage plans for 2015/2016 will have significant impact on global production and prices given its limited warehousing capabilities.
The USDA estimates that, in response to continuing low prices, global consumption will exceed production in the 2015/2016 season, leading to a reduction in global stocks for the first time in six years, though stocks will still remain near historic highs. Most of the stock drawdown will occur in China.
In the 2015/2016 season, U.S. cotton acreage will decline by an estimated 12 percent and that the national harvest will total 14 million bales, down from an expected 16.1 million bales in the current year.
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