Cotton Trade Falls in June, but Rises in 07/08; Likely Higher in 08/09
Source: globecotnews Date: 2008-07-29
With Chinese mill demand continuing to outpace production again this year, imports through the first eleven months are up from this point last marketing year and are set to reach the second-highest volume on record in 2007/08. Cumulative volume stands 12.8% over the same period last year, even as June shipments are off -16.4% from twelve months ago to less than 970,000 bales.
Looking ahead to the new marketing year, imports promise to remain robust, owing to expansion in the deficit between domestic production and mill demand and owing to early hints at robust U.S. sales to China for next year. First, as Chinese mill demand has outpaced production each of the last several years, this has increased the deficit between the two. This deficit has been satisfied through a combination of reducing ending stocks and increasing imports. Now, with Chinese ending stocks at a two-decade low relative to the volume of demand, China must satisfy this deficit through increased purchases of foreign cotton. Accordingly, if this deficit does indeed increase next year, imports are likely to rise from this year to the second-largest volume on record to fill the void.
Secondly, early evidence of strong carryover sales of U.S. cotton destined for China suggests total Chinese imports may climb to a near-record level next year. As the largest supplier of Chinese cotton imports, the U.S. typically accounts for about 40% of total volume. As of last week, cumulative sales of unshipped U.S. cotton to China for the current and next marketing year stand at 1.27 million bales, the second-highest level for that week on record. From year to year, this volume is strongly predictive of total Chinese cotton imports in the following marketing year, suggesting Chinese imports could realistically rise to the second-highest level on record in 2008/09, also.
