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Serving: East

China at center of cotton market

China remains a key influence on the cotton market. “It is the largest producer, consumer, and importer of cotton, and most importantly, our largest export customer,” says Dale Cougot, senior economist for the National Cotton Council.

“We’re always trying to second guess what their numbers are, but based on information we have, their production is expected to be relatively flat for 2010. Current trends indicate their mill use should go back above 3 percent growth.

“Recent reports show total fabric production has jumped almost 13 percent, on a monthly basis, over a year ago, and a record for monthly volume. Cotton fabric use rose almost 20 percent during the same period, pointing to higher imports,” he said at the annual joint meeting of the Southern Cotton Ginners Association and the Delta Council’s Ginning and Cotton Quality Improvement Committee.

“Their stocks-to-use ratio was at 48 percent in 2008, but going into the new marketing year it’s only 36 percent. That’s just three months’ consumption, so if they have any problems or delays with their crop, it could be favorable for more sales of U.S. cotton.”

Chinese demand has been quite good of late, he says, “but there is growing concern that their economy could falter or at least cool down some.”

India, Cougot says, “is a racehorse coming up behind us. They continue to benefit from higher yields from further adoption of Bt varieties and improved farming practices. They could have a record crop this year.”

In the past year, he notes, there has been “a major conflict” between their textile industry and their producers, with pressures on the government to restrict cotton exports. “Even though the ban was short-lived, it planted the idea of India being a very unreliable supplier. The U.S. benefited from this and gained some share of cotton going into China. India’s export ban just underscored the importance of the U.S. being a timely and efficient supplier of cotton to the world market.

“Export sales, particularly to China, can be fairly large sales, and if you’re pulling out of four or five warehouses, it takes only one facility not being able to make a container available for an entire shipment to be stopped. The Council and the Cotton Foundation through its Vision 21 project are looking into ways to improve the cotton flow situation, and we hope to soon have some recommendations.”

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TAGS: Cotton
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