INDIA’s forecast 2017/18 ending stocks for cotton have been lowered substantially from 13.2 million bales to 11.7 million in the United States Department of Agriculture’s (USDA) December update released today.
This change since the November report partly reflects a 500,000-bale cut to production, only partly offset by a 300,000-bale cut in exports, but is primarily driven by a revision to 2017/18 beginning stocks and consumption.
India’s official estimates of cotton consumption were recently revised back to the 2015/16 marketing year, showing higher use than USDA’s data.
These revisions were concentrated on “non-mill use,” indicating consumption outside the usual commercial and industrial channels.
Many market observers have suggested for some time that stocks were tighter in India than USDA reports indicated, but uncertainty persisted about which component of the balance sheet might be incorrect.
The revised consumption data from India’s Cotton Advisory Board lowers stocks nearer trade-consensus levels via higher consumption.
In all, from 2015/16 to 2017/18, the most recently revised data suggest an aggregate of about 1.2 million bales more consumption over the three years than indicated in the USDA’s November report.
This has a significant impact on India’s stocks-to-use, with 2017/18 stocks-to-use falling from 45 per cent in the November report to about 40pc this month.
These changes are sufficiently large to impact global balance sheets as well, with revisions to India accounting for half of lower 2017/18 ending stocks.
Most of the remainder is due to Pakistan, owing to its greatly reduced crop, or higher exports from Australia, Brazil, and the United States.
Lower global ending stocks
For 2017/18, lower beginning stocks, lower global production – particularly in South Asia – combined with higher use in India, Indonesia, and Turkey, results in substantially lower global ending stocks entirely outside of China.
The US balance sheet has production up slightly and exports up by a greater amount, resulting in lower ending stocks. The US season-average farm price is raised three cents to 66 cents per pound.
Spot prices and the A-index have moved upwards as global demand conditions continue to appear strong, and crop outlooks for some major producers, such as Pakistan, weaken.
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