World Cotton Production is Set to Grow, While Cotton Price is Likely to Fall

After a significant drop in global cotton production in the financial year of 2015-16 when major cotton producing nations, led by Pakistan, the United States, and China, saw their cotton output reduced by 9%, the world cotton production is very much likely to pick up in the upcoming financial year, as the International Cotton Advisory Committee (ICAC) forecasts that world cotton output will rise by 2% to 23.4 million tonnes.


The forecasted growth is the result of an increase in cotton planted area around the world, which is expected to grow by 5% to 30.6 million hectares in 2017-18, after two consistent years’ contraction. Although the average world cotton yield is expected to decline by 2% to 764 kg/ha in this upcoming financial year, compared to781 kg/ha in 2016/17, the figure is still in line with the four-year average level, which is not likely to have a big impact on the world cotton output.


When it comes to the cotton prices, ICAC predicts that the average cotton prices are likely to be around 77 cents a pound, due to the downward pressure mainly from Chain as Chinese auction programme expected to shrink the country’s stocks to the lowest in six years. China is set to start auctions of cotton from the country’s state stockpiles, the auctions will offer 30,000 tonnes of cotton a day, although more could be released if demand warrants.


As result, China’s total cotton stocks are expected to dropping further to 7.5m tonnes by the close of 2017-18, compared to a rise of 7% to 8m tonnes in the world stocks in the same period caused by rising productions in Indian, Pakistani and US. ICAC also suggests that this would mark the first season since 2011-12 that China’s stocks account for less than half of world inventories.


Despite the dropping cotton stock, China’s cotton area may expand by 3% to 2.9 million hectares, as cotton prices become more attractive than those of competing crops. Assuming a yield of 1,640 kg/ha, cotton output in China could reach 4.8 million tons in 2017/18, according to ICAC.


In India, cotton area is expected to recover by 7% to 11.2 million hectares in 2017-18 as firm domestic cotton prices and less attractive prices for competing crops attract more farmers to cotton. Assuming a national average yield of 530 kg/ha that is similar to the 5-year average, cotton production in India will increase by 1% to 6 million tons in 2017-18.


The US saw its average yield improving by 12% to 958 kg/ha in 2016/17 due to beneficial weather and plentiful rains during the growing seasons, resulting the total output estimated at 3.7 million tons. In 2017/18, production in the US is projected to rise by 7% to 4 million tons.


After a significant drop in yields and cotton are in the past two years, Pakistan’s cotton area is forecast to increase by 3% to 2.6 million hectares as better yields and firm cotton prices encourage farmers to plant more cotton. Assuming a yield of 739 kg/ha, Pakistan’s cotton production could reach 1.9 million tonnes in 2017-18.


ICAC also reports that world cotton stocks are expected to decline by 6% at the end of 2016-17 to 18.1 million tons as China reduces its stocks by 17% to 9.3 million tons. However, stocks outside of China are projected to increase by 8% to 8.8 million tons by the end of 2016-17.

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