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10pc decline in global cotton stocks projected in 2018-19

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The 2018-19 season projection is foreseen with a reduction of 3pc in production, 3pc increase in consumption as well as a 10% drop in global stocks which will bring down the world cotton reserves. The global stocks-to-use ratio is expected to drop to about seven months of mill use (0.61).

The reduction in China’s warehouses will be the major reason of the global stocks decline. During the period from March till August 2018, more than 2 million tonnes of fiber were sold by the Chinese State Reserve which reduced stocks approximately to 8.6 million tonnes. A further 23pc decline in the Chinese stocks to about 6.6 million tonnes can be expexted in 2018-19 season if the production and consumption coordinates with the projected levels.

Warehouses outside of China are moving in the opposite direction, resulting in an increase of 24pc amounted to 10.1 million tonnes in 2017-18. Although, the increase in 2018-19 is expected to slow down amounting only to 10.2 million tonnes. By the end of the coming season, warehouses outside of China are expected to house about 61% of the world’s global reserves.

China’s ending stocks indicate increased use of mills and which will result in increased imports and the 2018-19 growing global demand might head towards increased prices during a possible global production decrease.