When cotton prices dropped at the start of 2014/15, the gap between international cotton prices, as represented by the Cotlook A index, and polyester prices in China, which accounts for 72% of world polyester production, narrowed significantly and greatly improved the competitiveness of cotton. However, this only lasted for a few months as polyester prices continued to drop while cotton prices stabilized. In 2015/16, that gap has continued to widen, with polyester prices falling from 52 cts/lb in August 2015 to 43 cts/lb in January 2016, averaging 48 cents/lb during the first half of 2015/16. During the same period, the Cotlook A Index has averaged 70 cents/lb, ranging from a high of 74 cents/lb to a low of 66 cents/lb. The ongoing drop in polyester prices cuts into cotton’s market share, particularly in China where polyester has been favored over cotton in recent seasons. Cotton consumption in China is forecast down 5% to 7.1 million tons in 2015/16, though it still remains the world’s largest consumer of cotton. World cotton consumption in 2015/16 is projected down 1% to 24.1 million tons. India’s consumption is expected to increase by 2% to 5.5 million tons in 2015/16 while Pakistan’s decreases by 12% to 2.2 million tons. Consumption in Turkey, the fourth largest, will likely remain stable at 1.5 million tons, while consumption in Vietnam and Bangladesh are expected to grow by 22% to 1.1 million tons and 13% to 1.1 million tons, respectively.
Given the fall in consumption and lower domestic cotton prices, China’s imports are expected to fall by 40% to 1.08 million tons. However, if the pace of its imports remains steady, then Vietnam may overtake China as the largest importer of cotton in 2015/16. Cotton imports by Vietnam for the first four months of 2015/16 totaled 327,000 tons, while those by China totaled 247,000 tons. 2015/16 cotton imports by Vietnam are projected up 17% to 1.1 million tons. Imports by Bangladesh are forecast to increase by 12% to 1.08 million tons. Consumption in both Vietnam and Bangladesh is increasing steadily, due to lower production costs, but both produce very little cotton, and instead must rely on imports to meet demand.
World ending stocks are projected to decrease by 7% to 20.5 million tons, which represents about 81% of world cotton consumption in 2015/16. The reduction in stocks this season is attributed to the sharp drop in world cotton production rather than gains in consumption. 2015/16 world cotton production is forecast down 14% to 22.5 million tons. In 2015/16, world cotton area contracted by 9%, to 31.1 million hectares, in response to relatively low cotton prices. Adverse weather and increased pest pressure contributed to a decrease in world average yield of 6%, to 723 kg/ha. Of the top 10 producing countries, China, the United States and Pakistan saw the largest decreases in volume.
