Although China’s tariffs on US cotton helped drag international prices down from June’s season-high of 101.7 cents per pound, strong demand in Asia and Southeast Asia has helped them rebound by the beginning of August. Usually, high prices drive an increase in cotton cultivation, but less-than-ideal environmental conditions and a lack of available water are projected to cause a reduction in planted area for many of the world’s top producers in 2018/19.
Sour trade relations between China and the USA show little signs of improving, and could even deteriorate further in the near term, potentially causing major shifts in global trade patterns. China’s 25% premium could prompt the USA, the world’s largest exporter, to seek new markets for its fiber, while other major exporters such as Brazil are expected to fill the void by increasing their shipments to China, the world’s largest importer.
Global production has increased 16% to 26.87 million tonnes in 2017/18, with increases expected from all major producers: India, China, USA, Brazil, Pakistan, West Africa, Turkey, Australia and Uzbekistan. Those increases, however, are the result of expanded plantings and favorable weather conditions, as global yields posted a marginal increase of 1%.
Global production for the 2018/19 season is currently projected at 25.9 million tonnes, which would represent a 4% decrease. Global consumption, on the other hand, is currently projected to increase 4% to 27.5 million tonnes. With global consumption at an all-time high, pressure on stocks is expected to reduce global reserves by 1.6 million tonnes to finish the 2018/19 season at 17.7 million tonnes. Stocks in China are projected to decrease for the fifth consecutive year to 7.5 million tonnes, while stocks outside are expected to remain stable at 10.1 million tonnes.