DEMAND FOR COTTON FALLS
The December USDA report came out extremely negative for the market decline of cotton production in the U.S. has surpassed expectations, though it was to support the market. But the report also reflected a reduction in capacity and exports from the United States due to the fall in world cotton consumption and reduction of inventory at the end of the 2011-12 season. In addition, cotton is very sensitive to the recession and the debt crisis in Europe does not add optimism.
The growing U.S. dollar also added a negative.
Exports of cotton from the United States in the week was low. According to the USDA on December 8, 2011, the U.S. had contracted 22.9 million bales (total exports in 2011-12 was 394.5 million bales, up 2.6% over the previous season), also contracted 75 five thousand bales of cotton in the ordinary cancellation 34.1 million bales for delivery (total exports of the season 2011-12 is 9686.4 thousand bales (-25.2%).
The demand for cotton in China weak due to reduced orders factories before Christmas. Domestic prices are falling, and it is estimated to continue to decline. At the same time there is growing demand for high-quality cotton.
Support for the domestic market is expected of public procurement.
According to Customs, the import of cotton to China in November 2011 amounted to 378.2 thousand tons, which shows an increase of almost 200% in annual terms. Imports from the beginning of 2011 until the end of November was 2.57 million tons, which is 8.4% higher than the same period in 2010. Import growth is associated with the completion of the state of stocks. It is estimated that Beijing has purchased on the world market, 0.8-1.0 million tons of cotton for supplies.
In addition, the continued purchase of cotton in the domestic market: by the middle of December, it was purchased by 1.43 million tons of cotton. Harvest in 2011 is estimated at 7.2-7.6 million tons, of which 4.1 million tons can be purchased for restocking.
Certified stocks at ICE continues to grow and as of 9 December totaled 93.711 million bales.
According to the USDA, world cotton consumption in 2011-12 is practically unchanged compared to the previous forecast and last season and will be 114.3 million bales. Expected further weakening of demand against the backdrop of increased uncertainty of fiscal and financial uncertainty. The estimated consumption is expected to decline in all countries: China, India, and Pakistan.
Significantly revised down U.S. production to 15.87 million bales (-9.8%), as well as exports from the United States - to 10.83 million bales (-22%).
Thus, cotton prices last week renewed fall in the medium-term falling trend. The December USDA report has had a very negative impact on the market, predicting a significant decline in exports from the U.S. and world cotton consumption.
According to the calculation model on 9 December, the average price of cotton in 2011 is expected to reach 138 cents per pound (USD 3042.4. / Ton) at the oscillation range 91,6-201,3 cents per pound (USD 2019,4-4438 . / ton).
In this case, the calculations for 2012 show a possible reduction in the average price of 33% by 2011, to 92.74 cents per pound (USD 2044.6. / Ton).
