The US cotton industry faces a slump of nearly 30% in export
earnings thanks to lower prices and weaker foreign demand, farm officials said,
raising doubts over the significance of firm advance orders by China.
The US Department of Agriculture pegged US cotton exports at
a four-year low of $4.8bn in fiscal 2012-13, which starts in October, tumbling
from $6.7bn the year before.
The drop reflected in the main lower expectations for weaker
sales prices, after a slide in New York cotton futures of some two thirds from
the record 227 cents a pound, for a spot contract, reached in March last year.
"Unit value is expected to fall by nearly 25%, as cotton
prices have fallen from the historic highs of the past two years," the USDA
stimulating import demand'
However, volumes were set to drop too, to 2.6m tonnes, the
lowest in fiscal year terms since 2003, and reflecting lower shipments to
China, the top importer of the fibre.
"[US] cotton exports are forecast down as the Chinese
government's reserve policy is no longer stimulating import demand to build
stocks," USDA officials said.
The comments come despite a firm start to the 2012-13 cotton
marketing year for orders to China which., while below levels of the previous
two seasons, are "third-highest in recent history", on Morgan Stanley analysis.
"Already, China has demonstrated a willingness to continue
importing from the US," the bank said, in a report earlier this week forecasting that China may
yet be set for a further round of cotton stockpiling, even after a
more-than-doubling in inventories over the last year.
China vs Canada
The USDA said that weaker cotton exports to China would,
with softer purchases of corn and soybeans too, return the country to second
place among US trade partners in agriculture, behind Canada.
"Tighter U.S. exportable supplies and high prices for corn
and soybeans are expected to lead to greater shipments to China by Brazil and
"In addition, an improved Chinese corn crop should lower
overall demand for imported corn."