U.S. Department of Agriculture's July Cotton Supply and Demand Report Reduces Output and Consumption

On July 12, the U.S. Department of Agriculture issued a monthly report on global cotton supply and demand forecasts. Compared with the previous month, this report increased the opening stocks in 2011/12 and lowered production and consumption.

The opening stocks were mainly raised by the United States and India; the US cotton production was lowered, partly offset by the increase in Australia; global cotton consumption was reduced by nearly 2% from last month, which was mainly due to excess yarn inventory and chemical fiber, etc. The decrease in the proportion of substitutes in textiles is smaller than the previous forecast.

The global import volume has been lowered in several countries due to the weak demand growth, of which the contribution rate in mainland China is more than half.

Exports from the United States, Brazil, and Australia have been reduced, while Indian cotton exports have increased. Global ending stocks rose by nearly 6% to 11.104 million tons. The estimated stock-to-consumer ratio is 44%, reflecting that the tensions in the past three years have eased, but it is still the third lowest since 1994/95.

Despite sharply lowering US cotton production in 2011/12 due to unfavorable weather, ending stocks have also increased.

The opening stock increased by 109,000 tons, due to the continuous cancellation of export contracts and the slow progress of shipments in the late 2010/11 period. In 2011/12, the output decreased by 218,000 tons from the previous month to 3.484 million tons. Despite the increase in cotton area in the report on the area planted in June, due to the rare drought in history, the abandoned land rate is expected to reach a record 30%. Mainly in Texas.

The amount of cotton used in the United States has not changed. Due to the decrease in US cotton supply and weaker foreign demand, exports fell by 218,000 tons to 2.61 million tons. Ending stocks increased to 650,000 tons. The inventory-to-consumer ratio is 19%. Although it is higher than last month's data, it is still relatively tight. It is expected that the average producer can receive an average price range of 90-110 cents per pound, and the upper and lower limits will each drop by 5 cents.