--Cotton output expected to outpace demand
--USDA forecasts an average price of 80 cents a pound in the 2012-13 season
--China's buying spree clouds forecasts
By Leslie Josephs Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Global cotton production is expected to fall 3.9% in the 2012-13 season, but weak demand appears likely to leave the world in a surplus, the U.S. Department of Agriculture said Friday.
That outlook would further pressure prices for the fiber. Benchmark cotton prices on ICE Futures U.S. have dropped 61% since hitting a record peak on March 7, 2011, of $2.27 a pound.
In its annual report released at the Agricultural Outlook Forum, the USDA estimated 118.5 million bales of cotton would be produced worldwide in the season beginning Aug. 1, down from the current season's record crop of 123.3 million bales.
"World production is projected to fall and consumption to rise in 2012-13, but supply is still expected to exceed demand, raising stocks further and pressuring prices," said the USDA's report. The agency forecast an average price of 80 cents a pound in the 2012-13 season. Global cotton consumption in that period is expected to rise 4.4% to 114.5 million bales, 4 million bales less than production.
The drop in global production would be led by China, the report said, forecasting a 9% decline in output from the world's top cotton importer and producer.
China has been on a buying spree since late 2011 to replenish its cotton reserves that were depleted by recent small harvests. Between September and January, China imported around 9.2 million bales, according to the China Cotton Association, a 56% increase compared with the same period last year.
The amount of cotton left over globally at the 2011-12 season's end on July 31, known as "ending stocks," is expected to rise by the largest amount in 25 years to 61 million bales, the USDA said. China is seen holding one-quarter of that.
The scale of China's purchases, which is expected to end next month, is complicating forecasting for the government agency.
"Early-season projections are inherently uncertain due to the difficulty of predicting market and weather developments," said the USDA. "However, for 2012-13, these uncertainties are exacerbated by the unknowns associated with the further accumulation and/or release of reserve stocks by China."
U.S. production is expected to increase by 8.3% to 17 million bales, while farmers are seen planting 10% fewer acres. The estimate assumes improving weather conditions in the drought-ravaged south.
But last week, the National Oceanic and Atmospheric Administration said dry weather likely will persist in Texas and Georgia, the top two cotton-producing states, through the end of May.
-By Leslie Josephs, Dow Jones Newswires; 212-416-4055; email@example.com
(END) Dow Jones Newswires
February 24, 2012 10:14 ET (15:14 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.
View All Market Commentary
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.