Because of this huge jump in production four years ago, mills never really had to be too worried about supplies, as stocks were plentiful and mills had the luxury to buy hand-to-mouth, which has worked quite well for them.
Consumption growth is of course much more linear and it took quite a while for it to catch up to this new production plateau. However, over the last 5 seasons we have seen a gradual increase from 98 mio bales to the current USDA estimate of 128.3 mio bales, which if correct would be 9.5 mio bales above production.
So statistically speaking we have reached an inflection point, as we are moving from a production surplus with ample stocks to a seasonal production shortfall, which will require some de-stocking, and this scenario is likely to continue in the foreseeable future.
When we look at world production and consumption outside China over the last four seasons, or since production made that quantum leap, we notice that four years ago the world outside China produced 21 mio bales more than it consumed, the following year it was 17 mio bales, last year it was only 13 mio and in the current season it is estimated by the USDA to be just under 10 mio bales. In other words, we have seen a gradual decline in the production surplus outside China to less than half of what it was 4 years ago.
marketing@alchempro.com
