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USDA Cotton: World Markets and Trade

13 June 2012

USDA Cotton: World Markets and Trade - June 2012USDA Cotton: World Markets and Trade - June 2012

Since China is the world’s largest cotton producer, consumer, and importer, its domestic programs and policies not only impact the domestic market, but also influence the global market and international prices.
USDA Cotton: World Markets and Trade Reports

China’s Reserve Policy Drives Internal and World Prices

Last year, with prices in free fall and record world stocks, China’s State Reserve announced a purchase price and program which helped stabilize domestic prices at about $1.40/lb and world prices at about $1.00/lb. Through the Reserve’s purchases of both domestic and foreign cotton, it effectively removed nearly one-third of growing global stocks from the market.

Since April, world prices have dropped by nearly 20 percent, to the lowest level in over two years. World stocks are forecast to increase again in 2012/13 as a weak recovery in demand is forecast to leave consumption below production for the third consecutive year. The higher announced reserve purchase prices could stimulate domestic production and fuel even greater increases in world stocks. Uncertainty over management of the reserve stocks underlies the bearish market. If the State Reserve releases large quantities, import demand could plunge and world, if not domestic, prices could sink even further. Alternatively, if reserve stocks are allowed to grow significantly, China’s imports may exceed current expectations, thereby, supporting world prices.


For 2012/13, world consumption and production are down as lower prices dim prospects for Southern Hemisphere planting, while China’s high internal prices reduced demand. Trade is lowered as China’s beginning stocks are raised due to higher imports in the current season. U.S. exports for 2011/12 are raised by 200,000 bales to 11.6 million due to higher imports by China, and lowered 200,000 bales in 2012/13. The 2012/13 forecast season average US farm price is lowered 5 cents to 70 cents/pound.


Both the A-Index and the U.S. Spot Price dropped dramatically in the second half of May and through the first week of June. Prices are currently roughly 20 percent below the April averages.

2012/13 Trade Outlook

Major Exporters: Lowered primarily on less demand from China.

  • Brazil is lowered 300,000 bales to 4.1 million.
  • United States down 200,000 bales to 11.8 million.
  • India is lowered 200,000 bales to 4.0 million.

Major Importers:

  • China is lowered 500,000 bales to 13.5 million as imports are shifted into 2011/12.
  • Thailand is down by 100,000 bales to 1.65 million as recovery from flooding proceeds more slowly than expected.

Trade Changes 2011/12

Major Exporters: Raised primarily on higher imports by China.

  • India is raised 500,000 bales to 10.0 million.
  • Brazil is raised 400,000 bales to 4.9 million.
  • Australia is raised 300,000 bales to 4.2 million.
  • United States is raised 200,000 bales to 11.6 million.
  • Malaysia is raised 200,000 bales to 750,000 on increased transit trade.

Major Importers:

  • China is increased 1.75 million bales to 23.25 million on increased import demand due to government stock building.
  • Pakistan is raised 200,000 bales to 1.2 million on revised data.

June 2012

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