Apparel and textile manufacturers can expect more cotton availability going forward, although volatility could curtail supply in some areas.
High cotton prices have prevailed in the 2016-2017 crop year, which are expected to encourage farmers to expand the area under cotton by 5 percent to 30.8 million hectares in 2017-2018, according to a new report from the International Cotton Advisory Committee.
Last week, the U.S. Department of Agriculture reported that spot cotton prices averaged 76.10 cents per pound, the highest weekly average since June 27, 2014, when the average was 77.72. The weekly average was up from 75.49 last week and 61.61 cents reported the corresponding period a year ago.
However, Cotton Incorporated noted in its April Market Analysis that May New York futures contracts declined from values near 79 cents and pound a month ago to those below 75 cents a pound recently. The A Index also declined several cents, dropping from levels over 88 cents a pound to below 85 cents.
India’s cotton area is forecast to increase 7 percent to 11.3 million hectares, as farmers are encouraged by better returns due to high cotton prices and improved yields, ICAC said. Based on average yields, production could increase 3 percent to just under 6 million tons.
After contracting in the last five seasons, China’s cotton area may expand 3 percent to 2.9 million hectares due to the stable cotton policy and high cotton prices. Production in China is expected to rise 1 percent to 4.8 million tons, the first increase in five seasons.
Farmers in the U.S. are forecast to expand harvested cotton area by 12 percent to 4.3 million hectares, with an expected production growth of 8 percent to 4 million tons.
Cotton Inc. said, “Whether or not the U.S. will be able to maintain a high level of exports will be an important factor shaping price direction in the upcoming 2017-18 crop year,” adding that “given the U.S. position as the world’s largest exporter, the eventual size of the change in U.S. ending stocks can be expected to influence price direction around the world.”
Unlike the other top cotton producers, area in beleaguered Uzbekistan is expected to contract 4 percent to 1.2 million hectares in accordance with government plans to reduce areas where yields are low, and use them for other agricultural products. Many Western companies have also curtailed their use of Uzbek cotton over concerns of child labor and other human rights violations. Uzbekistan’s cotton production is projected to decline 2 percent to 770,000 tons.
World cotton mill use is expected to surpass world production for the third consecutive season in the coming year. World consumption is projected to increase 2 percent to 24.6 million tons as world economic growth recovers in 2017 and 2018.
World cotton trade is projected to increase 5 percent to 7.9 million tons in 2016-17, after declines during the previous three seasons. Imports by Bangladesh are forecast to rise 3 percent, while imports by Vietnam should increase 16 percent. Imports by China, now the world’s third largest cotton importer, are expected to increase 3 percent, while exports from the U.S. are projected to increase 53 percent to 3 million tons and are likely to account for 38 percent of world exports. India’s exports are projected to decrease 30 percent to 886,000 tons.
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