The global cotton surplus next year will decline for the first time in six years as sinking prices force farmers in Australia, Brazil and China to cut production and boost demand for fibre, the International Cotton Advisory Committee (ICAC) said on Monday. Issuing its first forecast for the 2015/16 season which ends in August next year, ICAC said it expects world inventory to fall to 21.13 million tonnes, down from an estimated 21.25 million tonnes in 2014/15.
That would be the first drop in ending stocks since 2009/10 and coming off record highs set over the past two years, according to US government records. Even so, it will take several seasons for significant stockpiles to reach a more sustainable level, and low cotton prices are likely to persist while the market adjusts, it said in its monthly report.
In 2015/16, production will fall by 1.5 million tonnes, or 6 percent, to 24.55 million tonnes from 26.08 million estimated for 2014/15 and consumption will rise by 28,000 tonnes to 24.67 million tonnes. China accounts for a big portion of current global inventory after Beijing's three-year policy to support its farmers. Even so, by the end of the current season, stocks outside of the country are expected to rise by 20 percent to nearly 9 million tonnes, the second-largest volume in the past three decades, ICAC said.
Much of that increase will be held in producing countries and will cause exports to fall 15 percent to 7.5 million tonnes. For the current year which ends in July, the ICAC estimated that Brazil will produce 1.5 million tonnes of cotton, down 10 percent due to low prices, while China, the world's top consumer, will have a crop of 6.4 million tonnes, down 7 percent. Australia's crop will fall by 47 percent to 470,000 tonnes due to weak prices and a significant drought.