Vietnam is the world’s fastest-growing market for cotton. This strong demand has spurred opportunities for greater U.S. exports. U.S. market share in Vietnam has grown to more than half from around a third in only 3 years. Burgeoning imports of U.S. cotton are expected to underpin Vietnam’s record 2018/19 consumption and to surpass projections for 2017/18 record imports and use.
New and existing foreign investment continues to flow into Vietnam’s spinning mills, due to the country’s low-cost environment relative to Japan and South Korea. A major contributing factor has been Vietnam’s yarn exports, particularly to the world’s largest yarn importer – China – which accounts for around half of the country’s yarn production.
China and other foreign exporters (e.g., India and Pakistan) continue to be displaced as Vietnam’s yarn exports to China practically quintupled compared with 2012/13, signifying the expanding link between these countries’ textile industries. Expectations for expanded trade support record spinning in addition to greater cotton imports, especially those from the United States.
Vietnam was the leading destination for U.S. cotton exports in 2016/17 (and 2017/18 year-to-date), as cotton was the most valuable U.S. agricultural export to the country during the same period, accounting for over 40 percent of total agricultural export value. This has continued in 2017/18 as evidence by record U.S. exports to Vietnam from August to June. Vietnam’s prowess as the projected second-largest importer in 2017/18 and 2018/19 has helped propel 2017/18 U.S. exports even higher this month, reaching the highest level in over a decade.
Changes to China’s Balance Sheet
This month’s forecast contains modest changes based on a review of China’s textile trade relative to consumption, recent domestic price movements, the level of sales by the state reserve this year, and estimates of free-stocks compared to demand. Changes include increases to China’s consumption and ending stocks for the period 2014/15 to 2018/19.
More on Cotton
Consumption was raised 500,000 bales in 2014/15 and 1.0 million bales in each of the subsequent years. In addition, exports were raised slightly for 2017/18 and 2018/19 to reflect higher re-exports from bonded warehouses.1 No changes were made to estimates for production, and imports were virtually unchanged.
Changes to consumption and exports have lowered China’s 2018/19 endings stocks to 28.4 million bales from 33.1 million, a reduction of 14 percent. China’s stocks-to-use ratio is now estimated at 67 percent for 2018/19, well above the 36-percent average observed in the 5 years prior to State Reserve acquisitions beginning in 2011/12.
These higher stocks-to-use ratios reflect stocks still held by the state reserve, and the view that free-stocks, those not held by the state reserve, are higher than those held before 2011/12 largely as a result of the large sales from the state reserve seen over the last few years.