Global cotton and polyester prices, demand

After the soaring of international cotton prices in 2010/11, many spinning companies began to use polyester to replace cotton. In early 2013, the price difference between cotton and polyester continued to widen.

Polyester prices were fairly stable in 2013 and early 2014, staying at about 74-76 cents/pound, until it fell to 65 cents/lb in April of this year. In the same period, international cotton prices rose to a peak of 99 cents/lb.

However, this situation changed significantly in July 2014, with the Cotlook A index falling to 80 cents/lb in July and the polyester price rising to about 73 cents/lb. In addition, China's cotton price has fallen from 141 cents/lb in 2013/14 to 126 cents/lb in the past few weeks. With the convergence of polyester and cotton prices, global consumption of cotton is expected to increase by 5% to 24,500,000 tons in 2014/15.

It is expected that consumption in Asia will grow strongly in 2014/15, and China’s consumption is expected to increase by 5% to 7.9 million tons; India’s consumption is expected to increase by 6% to 5.4 million tons; consumption in other parts of Asia It is expected to grow by 8% to nearly 2.4 million tons.

In 2014/15, global cotton production is forecast at 25.5 million tons, which is lower than the 26.1 million tons in 2013/14.

Although the monsoon has arrived in India, production and yields in many parts of India may be affected. Indian production in 2014/15 is expected to be slightly higher than 6 million tons. On the other hand, China, which has an average yield of three times that of India, is expected to produce about 6.2 million tons. After the United States experienced abundant rainfall, this year's output is expected to increase to nearly 3.5 million tons.

Trade volume in 2014/15 is expected to decline to 7.9 million tons, mainly due to a 26% drop in China's imports to 2.2 million tons. India’s exports may fall to 800,000 tons, which is less than half of 2013/14 exports. In 2014/15, US exports are expected to increase by 9% to 2.5 million tons.

In 2013/14, the Chinese government has already sold about 2.3 million tons of cotton, accounting for 37% of the 6.3 million tons purchased this year. It is estimated that China's national reserve will be 11.4 million tons.

China’s total final inventory is approximately 11.9 million tons. The stocks of other countries outside China rose by 6% to 8.6 million tons. This is the largest year for global ending stocks outside of China since 8.8 million tons in 2007/08. This situation will, to a large extent, suppress cotton prices in 2014/15.