16-Jun-2013
The global cotton inventory in the upcoming 2013/14 season will be 3 percent smaller than the 93 million bales currently predicted by the US government due to shrinking output and uncertainty about demand from China, the world's No 1 importer, according to a poll of nine co-operatives, traders and analysts. The carryover for the upcoming marketing season which starts on August 1 will rise just over 1 percent to a fresh high of 88.9 million 480-lb bales, the median forecast from the poll showed.
The overhang will exceed this year's record of 84.7 million, and will be largely due to China's massive stockpile, which will account for at least half of the total. The forecast is much lower than the US Department of Agriculture's official estimate announced last month, as industry estimates for output differ from the official ones.
Industry participants expect a 5-percent drop in global output to 115 million bales as farmers switch to higher priced grains, according to the poll, while the USDA has pegged production to fall 1.7 percent to 118 million bales. To be sure, forecasts will likely be adjusted as the season gets underway and the outlook becomes clearer.
The wide range of the carryover estimates from 84 million to 92 million bales also reflects uncertainty over demand from China, the world's No 1 textile industry. Traders worry that import demand may wane if the government curbs its buying as it overhauls its stockpiling policy, which has underpinned demand for fibre and supported prices for the past three years.
"Aside from the anticipated (US) harvest size, the biggest factor colouring the outlook for new-crop cotton exports is likely to be China and its rather opaque cotton policy," said INTL FCStone analyst Gary Raines. Beijing's state reserve is expected to top 48 million bales in the current season to July 31, accounting for 60 percent of the expected carryover. That could feed the country's textile mills for more than one year, based on USDA estimates.
"If (China's) mills tap the vast reserve supplies, purchases from the rest of the world could plunge," Raines said. Differences in supply estimates have also clouded the outlook. World output will fall 5 percent from 2012/13 to 115 million bales, the poll showed, below the USDA's estimate of 118 million bales.
Using a record yield projection, the USDA's estimate for China is too high still, Sharon Johnson, cotton specialist at Knight Futures, said. The country's cotton association said last week it expected a decline in output of 5 percent, but the USDA has pegged the drop at 2.7 percent to 35 million bales.
The US outlook appears to be clearer and brighter after the world's third-largest producer has whittled down a massive oversupply caused by soaring output and weakening demand over the past four years. Cotton inventory will fall over a fifth to 3.13 million bales as lower output and steady demand offset declining exports, according to a median of 10 participants. That is only slightly higher than the USDA's current estimate of 3 million.
Farmers will produce 14 million bales of cotton, their smallest crop in four years and in line with the USDA's estimate, lured by higher-priced grains and as drought conditions threaten crops in Texas, the country's largest producing state. Abandonment rates may hit their second-highest on record in Texas, where dry weather is expected to persist well into the summer, although that may be offset by better growth prospects in the Southeast, INTL's Raines said.
Source:-www.brecorder.com
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