Historical revisions in world cotton stocks jolt market

A huge increase in estimated world ending stocks, based on cotton discovered in inventory in India, jolted the market in early April.

The new supplies reported in USDA’s April 10 World Agricultural Supply and Demand Estimates, raised world ending stocks to an extremely bearish 66.1 million bales and immediately sent December 2012 cotton futures lower that day.

“We were thrown a bit of curveball in those numbers,” said O.A. Cleveland, professor emeritus, Mississippi State University, speaking at the Ag Market Network’s April conference call. “The huge increase in ending stocks put the bears back in control of the market.”

USDA increased India’s 2011-12 beginning stocks by 3.25 million bales and ending stocks by 1.6 million bales based on analysis of historical data which indicated that stocks were significantly higher than previously estimated. (See file://localhost/see http/::www.fas.usda.gov:psdonline:circulars:cotton.pdf for further details).

USDA also increased China’s estimated stocks by 3 million bales to 23.1 million bales. China’s forecast ending stocks now account for 35 percent of world stocks.

 “These were very large changes in very important cotton producing and consuming countries,” Cleveland said.

Cleveland noted that USDA also raised China’s imports by 2 million bales, putting China’s total import estimate at 20.5 million bales. USDA also lowered China’s use by 1 million bales.

Brazil’s projected cotton exports are also 100,000 bales higher, noted Cleveland, while its ending stocks were lowered 100,000 bales to 3.4 million bales.