Highly Competitive trade

ICAC trims cotton price forecast as China import hopes cut

GMT 11:50 2015 Wednesday ,25 November

Sriyadithatextile - ICAC trims cotton price forecast as China import hopes cut

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The International Cotton Advisory Committee nudged lower its forecast for cotton prices as it warned that China's imports would fall even further than thought, to their lowest in at least a decade.

The intergovernmental group slashed to "less than" 1.4m tonnes, from 1.6m tonnes, its forecast for China's cotton imports in 2015-16, doubling to 24% its forecast for the pace of decline.

The downgrade, to the lowest figure on records going back to 2006-07, means that China, while "likely" remaining the world's top cotton importer in the season, which started in August, it may see its share of global buy-ins drop to 17%.

That compares with 22% last season, and the 55% share of world imports it had in 2011-12.

'Concerns over quality'

The downgrade comes as the cotton industry is getting to grips with the knock-on effects of a reform of China's subsidy policy, which until last year guaranteed farmers prices which were well above international market rates.

That led to a ramp-up in state inventories to a level which the ICAC says is "still around 11m tonnes", as farmers sold into the government programme, while the fibre and textiles industry prioritised cheaper imported cotton, or turned to foreign yarn, over which there are less stringent import restrictions.

China's cotton imports in September fell to 50,948 tonnes, a drop of 59% year on year, and the lowest figure on data going back to 2005, in what was taken as a sign of some success in China diverting demand back to domestic supplies.

However, the ICAC flagged that specification factors would support the need for significant imports this season nonetheless, noting "concerns over the quality of this year's domestic crop".

'Competitive trade'

Nonetheless, the committee highlighted the efforts that merchants were going to to secure fresh customers to replace Chinese buyers.

"The cotton trade remains competitive as China's cotton policy evolves and cotton-exporting countries continue to seek new markets," the ICAC said.

These efforts were meeting with some success, with the estimate of Bangladeshi purchases in 2015-16 lifted from 972,000 tonnes to "slightly" above 1m tonnes, and Vietnam's imports pegged at 990,000 tonnes, an upgrade of 34,000 tonnes.

Imports to Asian countries other than China "are taking on a larger share, and will partly offset the [China] decline", the committee said.

Price forecast

Nonetheless, the ICAC nudged higher by 110,000 tonnes, to 20.73m tonnes, its forecast for world cotton inventories at the close of 2015-16.

And it trimmed by 1 cent to 73 cents a pound its forecast for season-average cotton prices, as measured by the Cotlook A index of physical values.

That would, however, represent a rise of 2 cents a pound on the average for last season, which world inventories ended at 21.86m tonnes.

The ICAC estimated US cotton production this year at 3.2m tonnes, above the 2.90m tonnes that the US Department of Agriculture has factored in.

The groups are in line in foreseeing US cotton exports of 2.2m tonnes in 2015-16.

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