According to the United States Department of Agriculture (USDA), Pakistan’s cotton consumption is estimated at its lowest level in over 20 years, forecast down 700,000 bales this month to 9.0 million, dropping nearly 2.0 million from the previous year mostly because of lower supplies. Pakistan’s production is projected at the lowest level in nearly 40 years at 3.7 million bales. Although imports are projected above the previous year at 5.0 million bales, mills in Pakistan have had issues with the stronger U.S. dollar, opening Letters of Credit (LC), and finalizing older contracts negotiated at significantly higher prices earlier this year.
Global Overview
Global cotton consumption is projected to down 3.3 million bales this month to 111.7 million. Declining supplies, lower profit margins for spinning mills, falling yarn orders from fabric and apparel companies, and higher inflation are all pressuring consumption. Significant challenges for the three largest consumers – China, India, and Pakistan – are expected to lower global consumption significantly below the previous 2 years. India’s consumption is projected to down 1.0 million bales this month to 23.0 million, falling more than 2.0 million from the previous year and the largest year-over-year decline for all cotton consumers. Significantly lower beginning stocks, falling exports of textiles (yarn and fabric) and cotton products, and less competitive export prices are pressuring consumption prospects.
China’s consumption is also projected to be down 1.0 million bales this month to 35.5 million, marginally above the previous year but more than 5.0 million below 2 years prior. As the world’s largest cotton consumer and importer of cotton yarn, China’s supply, and use situation is normally indicative of the overall direction and vitality of the global cotton supply chain.
2022/23 Outlook
Global production is down 700,000 bales from the previous month to 115.7 million, largely owing to lower production in Pakistan. This is the fourth consecutive month that Pakistan’s production has fallen and is supported by weak arrivals data. Global stocks are forecasted up with consumption projected to be down more than 3.0 million bales. This is the seventh consecutive monthly decline in global consumption. Global trade is down roughly 1.0 million bales, led by a decline in China, and is now forecast to be lower than the previous year. The U.S. balance sheet shows higher production and ending stocks than the previous month. Exports and consumption are forecast to go down this month, and shipments are projected at the lowest level in 7 years. The projected U.S. season-average farm price is unchanged at 85 cents per pound.
