World cotton production is expected to rise 2 million bales in 2006/07, to 116 million. Consumption is expected to raise 5 million bales, to 121 million. This would be a 4.4 percent increase in consumption.
World ending stocks are expected to fall 2.5 million bales, to 52 million. A 2.3 million bale decline is also foreseen for world trade in 2006/07, with a substantial portion of that decline resulting from lower imports by China.
At 18.5 million bales, China's imports are expected to account for 44 percent of world trade in 2006/07, about the same as in 2005/06.
The timing and volume of China's imports can embody a large degree of uncertainty and importance for world cotton markets. For decades, China was the biggest source of residual demand on world cotton markets.
But China has opened its economy and now consumes 40 percent of the world's cotton. So, the uncertainty is no longer about residual demand, but now concerns world demand.
Traditionally, estimates of China's cotton crop and yarn production together indicate China's likely demand for imports.
Cotton production fell in 2005/06, according to China's National Bureau of Statistics (NBS), and yarn production is soaring.1 This could be driving down stocks and sustaining imports.
Instead, credible reports have emerged from China suggesting that ending stocks rose in 2005/06, and China's purchases of U.S. cotton are down 77 percent from a year ago.
Given the limitations of the estimated gap between production and consumption as a forecast of import demand, trends in China's purchases, imports, and prices bear closer examination.
United States Department of Agriculture Economic Research Service
marketing@alchempro.com
