Early Forecast Wrong: Lower 2013/14 Prices Due To Changed World Situation

WASHINGTON — December 2, 2013 — In April 2013, the Secretariat’s projected price for the current
season was 118 cents per pound. Since then ICAC’s projected price has plummeted, and the current
midpoint of the forecast range is 88.

China’s reserve and import policies also weigh heavily on international prices. So far in
2013/14, the China National Cotton Reserves Corporation (CNCRC) has bought more than 2.7 million
tons, and its total cotton reserves have passed 10.1 million tons. On November 26, CNCRC announced
that it would begin selling cotton on November 28, 2013 at 18,000 Yuan per ton or 133 cents/lb
using current exchange rates, for standard grade starting with its 2011 reserves. Although there is
no planned volume of sales from the reserves, the ICAC Secretariat is assuming that CNCRC will sell
roughly 2-3 million to nsso that China’s ending stock for the season will be around 11-12 million
tons.

With regard to its import policy, in the past two seasons, China imported much of the surplus
stock on the world market, allowing prices to remain relatively high. This season its imports are
expected to decrease 40% from last season to 3.1 million tons. The sales price of cotton from
China’s reserve is significantly higher than the import price with a 40% tariff. Thus, unless
international prices rise above the mid-90s and imports would be lower than expected, China’s
imports are projected to remain around 3.1 million tons for the season.

As was the case for the last three seasons, 2013/14 world production is expected to outpace
world consumption with 2013/14 world production projected at 25.6 million tons, down by 1.2 million
tons from last season. World cotton consumption is forecast at 23.8 million tons in 2013/14, up 2%
from last season with an upward revision of 85,000 tons in India from last month.

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Posted December 3, 2013

Source: ICAC