World cotton production is expected to decline slightly in 2007/08 to 25.5 million tons, and world cotton consumption is forecast to increase by 3% to 27.2 million tons.
As a result, world cotton ending stocks are expected to decline by 14% to 10.8 million tons, which would be the lowest since 2003/04. World cotton trade is expected to rebound by 9% to 8.9 million tons due to larger forecast Chinese imports.
The Secretariat raised its estimates of Chinese cotton production twice in the past year, in June 2007 and in August 2007. There appears to be a consensus in the Chinese cotton industry that production statistics published by the National Bureau of Statistics generally underestimated actual production.
In addition, the amount of cotton imported by China (Mainland) during 2006/07 (2.3 million tons) was much smaller than expected.
In September 2007, the China Cotton Association (CCA) estimated 2006/07 Chinese production at 7.7 million tons, higher than the current Secretariat estimate of 7.2 million tons.
The CCA based its revised estimate on higher cotton shipments from Xinjiang. The CCA projected 2007/08 Chinese production at 7.7 million tons also (compared to the current Secretariat projection of 7.2 million tons).
This difference of half a million tons would imply that Xinjiang cotton production increased by more than a half between 2005/06 and 2006/07.
The Secretariat is currently collecting information, and depending on the results of this investigation, it may decide to raise its Chinese production estimates again in the coming month. Such a change could affect the Secretariat’s projected 2007/08 Chinese and world imports.
Despite the small gain in prices in 2006/07, cotton area is estimated slightly down to 33.5 million hectares in 2007/08. Area is estimated up in Asia, including China (Mainland) (+2%), India (+4%) and Pakistan (+6%).
However, these increases are more than offset by area declines in the United States (-16%), in Turkey (-11%), in the African Franc Zone (-26%) and Australia (-51%), due to a combination of higher prices for competing crops and unfavorable weather at planting time.
Weather in the northern hemisphere was favorable in most large producing regions during the growing period, and the world average yield is expected to reach a record of 762 kilograms per hectare in 2007/08.
A record crop is expected in Asia in 2007/08: production is forecast unchanged in China (Mainland), and up in India (+9%) and Pakistan (+13%).
However, production is expected to drop by 17% to 3.9 million tons in the United States and by 21% to 620,000 tons in the African Franc Zone, due to reductions in area. Asia is expected to account for 58% of world cotton production, up from 55% last season.
Sustained global economic growth will continue to lift the world textile industry in 2007/08. However, projected increases in cotton prices are expected to slow the growth in world cotton mill use to 3%, down from 6% in 2006/07.
China (Mainland)’s textile industry will continue to drive world cotton mill use in 2007/08. However, the growth rate of mill use in China (Mainland) is forecast to drop from 11% in 2006/07 to 6% in 2007/08.
At a projected 11.1 million tons, Chinese mill consumption of cotton would be double the level of 2000/01 and account for 41% of global mill use.
Mill use in the rest of the world is expected to grow by 2% to a record 16.1 million tons (8% higher than in 2000/01); expected increases in South Asia, the Middle East and Central Asia will offset declines in other regions.
The gap between production and demand in China (Mainland) is expected to rise in 2007/08. As a result, Chinese imports are expected to rebound to 3.5 million tons, lifting world cotton trade to 8.9 million tons.
U.S. exports are expected to jump to 3.7 million tons, up 29% from 2006/07. Record production in India in the last several seasonsinflated domestic stocks and boosted exports.
Indian cotton exports are expected to continue to increase in 2007/08 to over one million tons, making India the second largest cotton exporting country behind the United States.
The Secretariat, using the ICAC Price Model 2007, forecasts a season-average Cotlook A Index of 71 cents per pound in 2007/08 (the 95% confidence interval is between 62 and 80 cents per pound).
The main variables in this model are the stocks-to-mill use ratio in the World-less-China (Mainland) and the stocks-to-mill use ratio in China (Mainland).
The projected price increase in 2007/08 is the result of an expected significant decrease in the stocksto- mill use ratio in the World-less-China (Mainland) in 2007/08. This price forecast takes into account the monthly averages of the Cotlook A Index in August and September 2007.
