U.S. cotton industry faces new challenges in cotton industry

With low cotton prices, high global inventories, and uncertainties in cotton usage at global plants, this (2016) year will be a challenging year for the US cotton industry. At the annual meeting of the National Cotton Council in Dallas, Texas, in February this year, Dr. Jody Campiche, Vice President for Economic and Policy Analysis, said: "While world mill consumption is expected to exceed global production by 2016, global cotton inventories remain at High Point". The U.S. Department of Agriculture (USDA) estimates that domestic textile mill usage will rise from 25,000 in 2014 to 3.6 million in 2014, showing an increase in consumption for the fourth year in a row. While the Economic Adjustment Assistance Program (EAAP) continues to be an important source of stability, allowing factories to invest in new facilities and equipment, the strength of the U.S. dollar is creating a challenge for yarn exports. Campiche said that the export market remains the main outlet for the United States' staple fiber and in recent years the U.S. export customers have changed. Mainland China is reducing the import of raw cotton, leading to a decrease in world trade. Although the United States exports to mainland China have been gradually declining since 2012, there was a significant decrease in the 2015 sales year. As a result, the NCC expects the United States to export 9.5 million bales in 2015, down 15.5% from 2014 and below the recent USDA forecast. Campiche added that considering the huge inventory of cotton and the expectation of a limited quota, mainland China's imports are expected to further drop from 5.5 million in 2015 to 4.75 million in 2016. The usage of textile mills in mainland China is expected to decline in 2016. Although domestic cotton prices in mainland China have dropped in the past year, they are almost double the price of polyester fibers. In the meantime, India will continue to become the world's largest cotton producer and the second largest exporter by 2016. According to Campiche, the total number of US cotton acquisitions in 2016 reached 13.8 million bales, resulting in an increase of 193,000 bales in ending stocks. Although global cotton inventories are expected to have fallen by 6.3 million bales in 2016, she said the reduction was not large enough to significantly reduce global inventories, which were at the beginning of the year up to 103 million bales. Campiche noted that although forecasts of global consumption exceeding production often support prices, the impact of the coming year may not be as clear. The global stockpiles dropped sharply due to the reduction of inventories in mainland China.