Australia's cotton growers are half way through reaping a record harvest set to be over 4 million bales, an industry official said on Thursday, and should benefit from a US government forecast for a 12 percent rise in world exports in 2011/2012. Importers of the fibre such as China are expected to continue replenishing stocks, which globally have declined by 18 million bales over the past two years.
According to the US Department of Agriculture's (USDA) May world agricultural supply and demand estimates released on Wednesday. Global consumption is likely rise only 2.5 percent to 119.5 million bales in 2011/12 (August-July), the USDA said, but world exports should rise to nearly 40 million bales from 35.6 million in 2010/2011 as China boosts imports by 2.5 million bales. Australia is expected to boost 2011/12 exports by 1.3 million bales to 4.3 million bales following the record 2010/11 harvest and positive outlook for 2011/12.
Brazil was expected to more than double exports to 4.5 million bales following a large carry-over from a record 2010/11 crop. Global 2011/12 forecasts point to the stocks-to-use ratio rising to 40 percent, up from 36.5 percent in 2010/11, but still relatively tight, according to Luke Mathews, an agricultural commodities strategist at Commonwealth Bank of Australia.
The USDA forecast a rise in world cotton ending stocks in the 2011/12 marketing year (August/July) to 47.93 million bales from 42.52 million bales in 2010/11 but there was little market reaction to a forecast of rising stocks next year. Analysts said next season's number could easily change, particularly if China, the world's largest weaver of the fibre, outstripped consumption forecasts and adverse weather hit crops.
The bullish outlook is despite the USDA forecasting a sharp 8 percent increase in production to a record 124.7 million bales. The government agency said China, which is also the world's largest cotton producer, together with India and Pakistan, will account for 70 percent of the increase. The USDA showed 2011/12 cotton production in the United States, the world's largest exporter of the fibre, will struggle to reach this year's level because of lower yields.
"Given dry conditions in the United States, the USDA is now projecting essentially no growth in US harvested cotton acreage on last year," ANZ economists said in a market report US production is expected to fall slightly to 18 million bales in 2011/12 from 18.1 million bales in 20Reuters The USDA forecast of US production was below trade estimates of 19.8 million bales.