The US government revised its forecast for global cotton inventories in the 2012/13 crop year higher into record levels on Wednesday, due to rising stocks in China, the world's No 1 textile market. In its monthly crop report, the US Department of Agriculture played down the impact of sales by China's state-owned reserve, which is expected to hold more than half the world's 2012/13 inventories.
The USDA raised its forecast for world ending stocks for the 2012/13 year through July to 82.45 million 480-lb bales, from 81.74 million bales, the old record forecast last month. The increase was the USDA's seventh since the season started on August 1.
The revision included a boost to China's portion of global stocks to 45.61 million bales from 44.11 million bales previously, on the back of higher import figures. The country is expected to account for more than 55 percent of the world reserves by the end of the crop year through July. "China's higher imports are expected to displace potential sales from the massive national reserve," the USDA said. The USDA upped its projections for Chinese imports to 16.50 million bales, from 15.0 million forecast last month.
Cotton prices pulled back off earlier intraday highs after the report. The most-active May cotton contract on ICE Futures US settled up 0.73 cent, or 0.86 percent, at 85.37 cents a lb. Should Beijing start to offload large portions of the reserves it has built up over the past two years as part of a program to support the country's farmers, New York cotton prices would feel pressure, traders have said.
China recently said it would keep sales from its state reserves steady, despite earlier expectations the country would increase that sales pace ahead of the upcoming crop. The USDA report was "friendly," and US figures were as expected, said Knight Futures cotton specialist Sharon Johnson.
Traders said they had expected a slight increase to US production numbers given a recent cotton ginnings report. The US production forecast was upped to 17.29 million bales, from 17.01 million bales forecast last month. The USDA raised its projections for exports from the United States, India and Australia, but lowered them for Brazil and Mexico. US export expectations were raised to 13.0 million bales from 12.75 million bales previously, based on higher supply and strong export shipments to date, USDA said.
An increase in US production largely offset a projected decrease in Brazil's output, and the forecast for world output was revised slightly lower as a result, to 119.7 million bales from 119.87 million bales previously, USDA said. India's beginning stocks figures were also revised up, to 8.94 million bales from 7.74 million bales previously. The USDA revised its projections for the country's imports to 1.7 million bales from 1.5 million bales. India is the world's second largest producer.