GLOBAL cotton stocks, outside of China, are expected to lift to a record 53 million bales for in 2017-18.
This is up from 41 million bales last season, according to a recent US Department of Agriculture report.
TheUSDA report is also tippinga 15 per cent expansion in cotton production, which is outpacing rising global cotton use.
Commbank agri commodities strategist Tobin Gorey said China remained the wildcard, and was forecast to be holding stocks of 39 million bales at the end of the 2017-18 season, down from 48 million last season.
Mr Gorey said China’s stockpile peaked at 67 million in 2014 and there was speculation a lot of what remained was poor quality.
“What they do have is not very good quality and it’s not easy for the spinner to use, so they need to blend it with the good stuff,” he said.
Mr Gorey said China would have to start buying quality cotton and it could lift its import quota or cut tariffs on out-of-quota imports.
“If China wants to buy more cotton, then it’s out there,” he said.
The USDA said 2017-18 cotton production in the US was forecast to decline by 643,000 bales from last year, but globally the drop would be offset by production increases in Argentina, Brazil and Greece.
The US crop was affected by hurricanes Harvey and Irma and frosts.
Mr Gorey said in June the US was forecasting a 19 million bale crop and prices were US66c/pound, but the latest crop forecast tipped a 20-21 million bale crop in the US, however prices rose, and are about US69c/pound.
“People are saying the price cannot stay up there,” he said.
“But the trade is very happy to accumulate cotton in the mid 60 cent range.”
The USDA said major exporters in Central Asia, Africa, the US and the southern hemisphere would all “bear the brunt of the burden of high stocks”.
US exports are forecast to decline by 400,000 bales, “more than offset by higher exports from India, Brazil and Australia”, the USDA report said.
The USDA is forecasting Australia to increase exports this season due to estimates of a large crop and “robust early season shipments”.
Mr Gorey said he expected prices in Australia to drop too.
“Australia is closer to our main destinations and Australia’s cotton is of higher quality and sits at a premium,” he said. “However, Australia’s crop is available at a time when other stocks are being run down.”
On Friday night ICE December cotton futures closed at US68.72c/pound or $449 a bale.
LYNDAL READING, The Weekly Times