The latest U.S. Department of Agriculture (USDA) cotton projections for 2012/13 indicate that world ending stocks are expected to reach a record 82.5 million bales, 18 percent (12.3 million bales) above the previous season.
Stocks have jumped dramatically over the previous two seasons as recent record cotton prices encouraged higher global production but, at the same time, discouraged world demand for the fiber.
China’s policies that support domestic cotton prices above world prices have also contributed considerably to a stock build-up there and consequently in the global supply of cotton.
The latest forecast for 2012/13 world cotton stocks indicates that global ending stocks will rise by a remarkable 77 percent (35.8 million bales) in only 3 years.
While world cotton stocks are rising for the third consecutive season, the extraordinary stock growth in China has occurred during the last two seasons.
In 2010/11, China’s stocks reached a 15-year low as the national reserve had been reduced significantly; however, policies ensued — and are still in effect — that promoted a rebuilding of these strategic reserves through both domestic purchases and imports.
By the end of 2012/13, China’s stocks are forecast to total 45.6 million bales, compared with only 10.6 million bales just 2 years earlier.
Although U.S. cotton stocks have risen since 2010/11, the United States has maintained roughly a 5-percent share of global stocks.
However, with China holding an expected 55-percent share of world stocks in 2012/13, stocks in the rest of the world are forecast to decline more than 10 percent.
Since most of China’s stocks are currently unavailable to the market, the growing tightness in global free supplies is supporting world cotton prices.