Global Cotton Market Outlook

Zeki Sahin BCI Istanbul – 13.10.14

Topics:

• Paul Reinhart AG

• Supply / Demand situation

• Technical analysis

• Outlook

About us:• Reinhart is a leading worldwide cotton

merchant founded in 1788 • Headquarter in Winterthur / Switzerland• Family owned company (7th Generation)• Annual turnover about 500’000ts (lint)• Involved in sustainably produced cotton (BCI,

CMIA, Fair Trade, Organic) / 4–5 % of turnover

4

5

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

0%

10%

20%

30%

40%

50%

60%

World fibres consumption in million tons

Cotton Cellulosic WoolPolyester Cotton share

6

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

518.00

20.00

22.00

24.00

26.00

28.00

30.00

10.00

12.00

14.00

16.00

18.00

20.00

22.00

24.00

21.4

9

19.8

1

21.0

7

26.4

5

25.3

5

26.6

1

26.0

5

23.3

5

22.3

7

25.4

7

27.5

6

26.7

7

25.7

5

25.6

9

20.5

6 21.4

2

21.3

5

23.7

5

25.4

3

26.9

8

26.9

2

23.9

6

25.8

9

24.9

7

22.4

4 23.2

5

23.6

1 24.4

1

World Production/Use/Ending Stocks(million metric tons)

ending stocks production use

7

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

50.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

4.10

3.80 4.

13

4.00

4.91

4.47 4.65

4.65

3.10

2.31

6.77

10.9

6

13.3

7

13.7

0

7.77

6.57

6.35

9.18

8.54 9.

25

8.85

8.72

7.16

8.66 9.

23

8.64

8.39

9.44

Ending Stocks(million metric tons)China World less China

8

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

50.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Chinaending stocks/use/production/imports

(million metric tons)ending stocks use production imports

9

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

50.00

1.00

2.00

3.00

4.00

5.00

6.00

USAending stocks/use/production/exports

(million metric tons)

ending stocks use production exports

10

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

50.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Indiaending stocks/use/production/exports

(million metric tons)

ending stocks use production exports

11

2001

/200

2

2002

/200

3

2003

/200

4

2004

/200

5

2005

/200

6

2006

/200

7

2007

/200

8

2008

/200

9

2009

/201

0

2010

/201

1

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

50.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Turkeyending stocks/use/production/imports

(million metric tons)

ending stocks use production imports

12

2007 2008 2009 2010 2011 2012 2013

USA 616,187 383,076 410,002 431,170 419,449 295,956 444,263

Greece 87,697 89,198 176,636 148,581 40,163 130,876 136,189

Syria 3113 3899 7833 53398 142.879 82.61 37423.48

CIS 98,628 52,588 89,615 135,476 46,171 85,263 187,948

Israel 2737 873 651 271 159.523 80.612 76.343

Egypt 5921 6094 3051 4973 5016.154 5404.017 2571.7

W.Africa 8669 2234 2913 12134 5313.475 2054.358 3439.9

Brazil 8,673 20,070 18,664 34,122 47,587 69,818 37,518

Australia 660 41 0 1994 8848.29 724.387 202.713

India 0 24930 23007 50381 10531.823 3873.742 8518.03

Mersin FZ 14620 27233 10188 5186 3357.961 7251.151 5294.095

Other 98776 2653 9149 10150 15226.793 11250.387 4165.12

50,000

150,000

250,000

350,000

450,000

550,000

650,000

750,000

850,000

950,000

616,187

383,076 410,002 431,170 419,449295,956

444,263

87,697

89,198

176,636 148,58140,163

130,876

136,189

98,628

52,588

89,615135,476

46,171 85,263

187,948

8,673

20,070

18,664

34,122

47,587 69,818

37,518

TURKEY IMPORTS (thousand tons)

Thou

sans

tons

13

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

2.37 2.

61

5.34

4.43

2.96

1.74

0.87 0.93

0.72 0.

85 0.89 0.

98

0.54

0.52

0.50 0.57

0.58 0.63

0.96

0.73

0.52

0.80 0.

94

0.82

0.37

0.34

0.35 0.

52 0.70 0.74

0.34

0.31

0.20

0.48

0.33

0.35

0.30

0.26

0.22

0.21

0.23

0.22

Top 7 Cotton Importers(in million metric tons)

China Bangladesh Indonesia Turkey Vietnam Pakistan Mexico

14

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

2.62

3.13

2.55

2.84

2.29

2.18

1.43

1.09

2.41

1.69

1.98

1.24

0.46 0.

54

1.01

1.34

1.05

0.65

0.43

0.44

1.04

0.94

0.49

0.81

1.30

0.99

0.92

1.15

0.95

0.78

0.48

0.46 0.

53

0.89

0.87

0.83

0.25

0.25 0.29

0.28

0.26

0.25

Top 7 Cotton Exporters(in million metric tons)

USA India Australia Brazil CIS WAF EAF

15

16

05-Ja

n-10

09-F

eb-1

016

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-10

20-A

pr-1

025

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29-Ju

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07-S

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012

-Oct

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16-N

ov-1

021

-Dec

-10

25-Ja

n-11

01-M

ch-1

105

-Apr

-11

10-M

ay-1

114

-Jun-

1119

-Jly-

1123

-Aug

-11

27-S

ep-1

101

-Nov

-11

06-D

ec-1

110

-Jan-

1214

-Feb

-12

20-M

ch-1

224

-Apr

-12

29-M

ay-1

210

-July

-12

14-A

ug-1

217

-Sep

-12

23-O

ct-1

227

-Nov

-12

08-Ja

n-13

12-F

eb-1

319

-Mch

-13

23-A

pr-1

328

-May

-13

02-Jl

y-13

06-A

ug-1

310

-Sep

-13

15-O

ct-1

319

-Nov

-13

24-D

ec-1

328

-Jan-

1404

-Mar

-14

08-A

pr-1

413

-May

-14

17-Ju

n-14

22-Ju

l-14

26-A

ug-1

430

-Sep

-140

10000

20000

30000

40000

50000

60000

70000

40

60

80

100

120

140

160

180

200

220

CFTC - net index fund/swap dealer position (futures+options combined)

net index/swap dealers (lots) ICE futures

17

01

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c-0

90

5-J

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09

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b-1

01

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20

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03

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7-S

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6-N

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21

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c-1

02

5-J

an

-11

01

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h-1

10

5-A

pr-

11

10

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y-1

11

4-J

un

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19

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23

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g-1

12

7-S

ep

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01

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v-1

10

6-D

ec

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10

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n-1

21

4-F

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20

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h-1

22

4-A

pr-

12

29

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0-J

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14

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g-1

21

7-S

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23

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t-1

22

7-N

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08

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n-1

31

2-F

eb

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19

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h-1

32

3-A

pr-

13

28

-Ma

y-1

30

2-J

ly-1

30

6-A

ug

-13

10

-Se

p-1

31

5-O

ct-

13

19

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v-1

32

4-D

ec

-13

28

-Ja

n-1

40

4-M

ar-

14

08

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r-1

41

3-M

ay

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17

-Ju

n-1

42

2-J

ul-

14

26

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g-1

43

0-S

ep

-14

-180000

-160000

-140000

-120000

-100000

-80000

-60000

-40000

-20000

0

30

50

70

90

110

130

150

170

190

210

CFTC - net commercial position (futures+option combined)

net commercial ICE futures

US Dollar Index, daily, 1 year back

18

19

Cotton futures most active month continuation, monthly, 30 years back

20

Cotton futures most active month continuation, weekly, 5 years back

21

Cotton futures most active month continuation, daily, 1 year back

Market Outlook season 2014/15:• China: watch the government policy, imports will be reduced, less

quotas available, support price for farmers remains high, competitiveness of mills remains challenging.

• Producers do not like current prices and seek for governmental support (China, India (MSP), USA (USDA Loan program), Greece (EU subsidy), Brazil and others). Prices are close to production cost.

• Record ending world stocks, see Supply and Demand table.• Speculators are slightly short. They can change position fast (they

prefer the long side). • Exterior factors: - health of global economy?, - stronger US Dollar, -

end of zero interest policy? - Commodity prices under pressure, - war in Syria, Irak. Mainly negative…

Cotton Prices for 2014/15• Expect more pressure on prices in general • Expect a narrow range of price fluctuation• Expect an increase in global cotton consumption• Harvesting and ginning accelerates in the coming

weeks, which will increase availability • Support program of governments for farmers may take

off temporary supply of raw material• Hand to mouth buying for mills will continue • Watch planting intentions in spring 2015• BCI cotton will increase market share…

THANK YOU!

http://www.reinhart.com