By admin       2018-07-25

The only projection in question for the current marketing year, Reichle says, is China, “and that’s because we really don’t know how things are going to play out with the tariffs situation. We know that USDA adjusted China’s consumption numbers for three years.“We feel China’s numbers have been understated for those years, and that the USDA adjustment was justified. We’ll just have to see if the tariffs impact their ability to keep consumption up this year. We’ve been seeing continued demand increases in the Far East over the past few years, and that’s expected to continue in the current year.”China had a huge buildup of stocks that overhung the market for several years, he notes, “but they’ve been drawing down those stocks over the last four or five years. We’re finally getting world stocks down, and even though they’re still high, they’re getting more in line with historical norms.”In the U.S., Reichle says, “When we have about a 20 percent stocks-to-use ratio, and when we start to get below that we really see the market start to shoot up. If we look at the years when we’ve had really strong price rallies, they correspond with low points in stocks-to-use. We’re not too far off that right now — with a projected 4 million bales ending stocks number, we don’t have a lot of room in the U.S. to further draw down stocks, and that’s a good position to be in.“The only number that’s really questionable is stocks outside China. Many in the trade think the USDA continues to overstate stocks in India, the largest cotton producer in the world. We think the number looks a little more bearish than it really is. In the U.S., which is dependent on cotton exports, we continue to see exports very strong, which tends to make us think there aren’t as many stocks in other exporting countries. So, the balance sheet is pretty favorable for U.S. cotton today.”

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