The world cotton industry is being "plagued" by a dearth of
demand stemming from China's support for prices of the fibre, the International
Cotton Advisory Committee warned, as it lifted further its forecasts for world
The intergovernmental group, while lifting by 65,000 tonnes
to 23.24m tonnes its forecast for world cotton consumption in 2012-13, noted
that this would for a fifth successive year remain below the record rates.
The continued shortfall in consumption below the all-time
high of 26.7m tonnes set in 2007-08 reflected a drop in China, the top users,
to 8.6m tonnes from 11m tonnes five years ago.
And this looks set to continue in 2012-13, given China's
support for minimum cotton prices which, while supporting farmers, were
encouraging mills to switch to other fibres.
'Plaguing the cotton industry'
"The policy by China of maintaining a minimum support price
for farmers of approximately $1.40 per pound, and enforcing the minimum price
with import quotas and a sliding scale tariff, ensures that mill use of cotton
in China will continue to erode," the ICAC said.
"The loss in mill use of cotton in China is being offset by
rising polyester and rayon use, resulting in a rapid decline in cotton's market
This decline was being only in part offset by increased cotton
consumption in other countries, such as India, Turkey and the US, the committee
"Demand destruction [is] plaguing the cotton industry."
The loss in consumption was reflected in an estimate for stocks
finishing 2012-13 at a record 15.93m tonnes, 740,000 tonnes more than the ICAC
has previously forecast.
The forecasts imply a stocks-to-use ratio, a key measure of
availability of stocks, and therefore price potential, of a heady 69%, boding
ill for prices.
The ratio for countries excluding China will, at 62%, be the
highest for 47 years "when it was the US, not China, that was operating a de
facto world cotton buffer stock in an effort to support domestic farmers".
The committee, in contrast to a Morgan Stanley forecast last week, assumed that China "will not continue adding to the state reserves",
having built up inventories of some 6m tonnes through stockpiling last season.
The comments also contrast with signs of reduced inventory
expectations in some major countries, as voiced by US Department of Agriculture
For Turkey, the Anakara office estimated stocks ending
2012-13 at 210,000 tonnes, 10,000 tonnes less than the official USDA forecast,
after insect damage depressed production hopes, as did power cuts which prevented
irrigation during a spell of high temperatures.
For Uzbekistan, foreign staff pegged carryover stocks at
1.23m bales, 270,000 bales below the USDA estimate, reduced by improved export
And the Brasilia bureau estimated the inventories in Brazil ending
the new season at 6.29m bales, 512,000 bales below the USDA forecast, with high
soybean and grain prices expected to tempt growers to switch crops.
"Cotton planted area for 2012-13 is estimated to fall around
35% as record soybean futures prices drive acreage shifts to soybean production
with higher comparable profitability," the bureau said.
The forecasts come in the run up to the next set of revisions to USDA estimates, which will be released in the Wasde crop report on September 12.