USDA Cotton: World Markets and Trade
11 October 2012
USDA Cotton: World Markets and Trade - October 2012

For 2012/13, global stocks are forecast at a record level for the second consecutive year,
causing prices to plummet. However, stocks held outside of China are only marginally
higher. In other words, virtually all of the global stocks build-up has occurred in China in
response to the government policy to support prices by rebuilding reserves.
Since China is the world’s largest importer, the policy can affect global prices in several
ways. For example, purchases of excess domestic cotton, or expanding imports to build
reserves takes supplies off the market and supports global prices. Alternatively, China’s
reserve policy can depress global market prices by releasing reserve stocks onto the domestic
market, which would reduce import demand and cause a larger accumulation of stocks in the
rest of the world.
After China’s stocks reached a 20-year low in 2010/11, caused by sharply expanding
consumption, China revised its price support policy to producers. Lack of transparency
regarding import quotas and release of reserves has contributed to uncertainty in the global
market, raising transaction risks for merchants and spinners.
Overview
Global cotton production for 2012/13 is raised, while trade and consumption are lowered. U.S. production is up and exports are reduced marginally to 11.6 million bales. The season average farm price is forecast down at 68 cents/pound.
Prices
The U.S. spot price and the A-Index remained relatively flat pending further developments in China’s reserve policy.
2012/13 TRADE OUTLOOK
Major Exporters:
Australia is up 150,000 bales to 4.35 million on higher 2011/12 production that is carried
forward.
United States is lowered 200,000 bales to 11.6 million on reduced import demand in China.
Major Importers:
China dropped 1.0 million bales to 11.0 million on higher production and lower consumption.
The following changes are made, due mainly to rising demand for yarn imports by China:
- Indonesia increased 100,000 bales to 2.25 million.
- Taiwan is raised 125,000 bales to 1.0 million.
- Vietnam is up 150,000 bales to 1.9 million.
Turkey jumped 450,000 bales to 3.45 million spurred by greater domestic use.
Trade Changes 2011/12
Major Importers:
Malaysia is revised down 183,000 bales to 1.0 million.

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