American Cotton Corporation (CI) Monthly Economic Report (August 2011)

After rebounding to more than 108 cents/lb after reaching a support level of approximately 93 cents/lb, the economic growth situation in many developed countries is even more pessimistic. The price of the December cotton contract along with other commodity prices Pulled down, the A-index also fell from above 116 cents/lb to below 109 cents/lb. Although the recent cotton transaction price has rebounded, it is still lower than the price of a few weeks ago. The sluggish demand continues to shroud the cotton market, and the uncertain economic conditions caused by the uncertain macroeconomic situation will cause cotton demand in 2011/12 to face sluggish growth.

As the demand for cotton in the entire supply chain has continued to slow down since last spring, the US Department of Agriculture has lowered its global cotton consumption forecast for two consecutive months. Its current global cotton consumption forecast for 2011/12 is expected to be 115.2 million bales, which is a decrease of 1.6 million bales from its July forecast. The cotton consumption in 2010/11 is also expected to be lowered by 1 million bales, from 114.9 million bales to 113.9 million bales. The country with the most expected decline in cotton consumption in 2010/11 is India (down 500,000 bales), followed by Bangladesh with a drop of 300,000 bales, Mexico with a drop of 200,000 bales, and Turkey with a drop of 100,000 bales. The 2011/12 cotton consumption forecast of many textile giants around the world is also expected to be lowered: China and India both cut 500,000 bales, Pakistan cut 200,000 bales, Turkey cut 100,000 bales, Bangladesh cut 250,000 bales, and Mexico cut prices. 100,000 bags.

According to the latest report from the US Department of Agriculture, global cotton production was also lowered: Production forecast for 2010/11 was lowered by 559,000 bales, and production in 2011/12 is expected to be lowered by 704,000 bales. Countries with large changes in 2010/11 cotton production data are Brazil (a drop of 800,000 bales) and Uzbekistan (a drop of 100,000 bales). The reduction in cotton production in these two countries was partially offset by India’s increase in cotton production, which is expected to increase by 900,000 bales from previous expectations. In 2011/12, the countries with the greatest reductions in output are expected to continue to be Brazil (down 600,000 bales) and Uzbekistan (down 200,000 bales). The production of cotton in West African countries is also expected to be lowered, with Burkina Faso down 200,000 bales and Benin down 125,000 bales. The output of Mali is expected to increase by 125,000 bales. These downward adjustments were partially offset by the expected increase in output of the US 55.4 million bales. Cotton growth in Texas is still not optimistic, but recent rains in southeastern and central Texas have contributed to cotton growth. Due to the increase in production expectations, US cotton exports are also expected to increase by 300,000 bales, from 12.2 million bales to 12.3 million bales. Expected declines in Brazilian cotton production in 2011/12 led to a lower forecast for its exports of 700,000 bales.

Since the expected decline in global cotton consumption exceeds the decline in its output, its ending stocks are expected to increase. The 2010/11 global ending stocks are expected to grow by 588,000 bales; the global ending stocks in 2011/12 are expected to increase by 1.7 million bales. The expected increase in global ending stocks and the reduction in consumer expectations have eased the inventory-to-consumption ratio of tense cotton. The ratio of global ending stocks consumption in 2010/11 (39.5%) is slightly higher than the global ending stock consumption ratio in 2009/10 (37.4%). ). The current forecast for the 2011/12 global ending stocks consumption ratio is 45.7%, which is 6.2 percentage points higher than the 2010/11 data. Excluding data for 2009/10 and 2010/11, 45.7% was the lowest global ending stock-to-stock consumption ratio since 1994/95.

Despite the recent weakness in cotton prices, cotton supply remained tight in 2011/12 relative to demand, which may provide support for the final cotton price. The United States’ cotton supply will continue to tighten in the world’s largest cotton exporter. The initial cotton inventory in the United States in 2011/12 was the lowest in 15 years; the drought was the largest cotton production area in the United States, and the export cotton orders for the same period hit a record high. The Chinese government will become another support factor for cotton prices. Although the specific purchase volume has not yet been announced, the Chinese government has indeed announced that it will supplement national cotton stocks at a price close to or slightly higher than the current price. In addition, the high food prices that compete with cotton for arable land will also put upward pressure on cotton prices. The dry and hot climate will also have a serious negative impact on the US corn and soybean harvest. The United States is the world’s largest corn and soybean producer and exporter. Its expected decline in production in 2011/12 and rising consumer expectations will drive up prices throughout the harvest. With the same amount of cultivated land in the world, cotton either competes with maize, soybeans and other cereals for price competition or faces supply shortages.