China’s cotton reserve policy is a two sided sword
According to ICAC, the International Cotton Advisory Committee, mill consumption in China has declined and is expected to slow in 2014-15. By contrast, the next three largest consumers, India, Pakistan and Turkey are expended to see growth in their mill use in the same season
Since the start of China’s reserve policy in 2011, China’s mill consumption declined by 17 %, from 9.6 million t in 2010-11 to 7.9 million tons in 2013-14. For the season 2014-15 consumption will be falling a bit slower, namely by one percent to 7.8 million t.
While world mill use is expected to increase in 2014-15, world production is forecast to decline by 2 % to 25.2 million t, narrowing the gap between world production and consumption. In 2014/15, India is expected to produce nearly 6.3 million t, a decline of 2 % due to the expectation that the monsoon weather will not be as favourable as during the 2013-14. Most of the decline in world production will however occur in China, where production 8is expected to decline by 10 %, or from 6.7. million t in 2013-14 to 6.0 million t in 2014-15. As the Chinese government has restricted its support for cotton to the Xinjiang region only, areas outside are expected to fall significantly.
World cotton trade is expected to decline in 2014-15 to 8.2 million t from 8.7 million t forecast for 2013-14. Also this decline stems mostly from China, where imports in 2014-15 are expected to be 2.2 million t, down by 30 % from 2013-14 levels and 60 % from its peak of 5.3 million in 2011-12. However, China’s decline is expected to be partially offset by imports from Bangladesh, Indonesian, and Vietnam, which are expected to import a total of 2.4 million t in 2014-15, an increase of 13 % from 2013-14.
ICAC’s World Cotton Supply and Distribution figures are shown in the following chart.