TH2033 MY2011/12 cotton imports will likely decline 20-30 percent from the previous year to 1.3 million bales in anticipation of a global economic slowdown.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: TH2033
Cotton and Products Annual
Orestes Vasquez Agricultural Attaché
Ponnarong Prasertsri Agricultural Specialist
TH2033 MY2011/12 cotton imports will likely decline 20-30 percent from the previous year to 1.3
million bales in anticipation of a global economic slowdown. In addition, the widespread flooding in
the last quarter of 2011 affected the textile industry, particularly spinners, as many companies closed
down their facilities. However, a recovery is expected in MY2012/13 which will increase import
demand by 20-30 percent to 1.6 million bales from MY2011/12.
MY2010/11 and MY2011/12 cotton import demand plummeted due to a spike in world cotton prices
and an economic slowdown domestically and internationally, and widespread flooding in the last quarter
of 2011. Cotton imports dropped 3.0 percent in MY2010/11 and will likely decline further by 20-30
percent in MY2011/12 to 1.3 million bales. The spike in world cotton prices hit record highs in mid-
2011 resulting in a reduction of MY2010/11 cotton yarn production of around 3.0 percent from the
previous year. The flooding affected around 4.0 percent of total textile industry. However, spinners
bore the brunt of the flooding as 20 percent of their facilities had to close down production.
Consequently, in the first half of MY2011/12, total capacity utilization of cotton-fiber spinning mills
declined to 51.0 percent of total capacity utilization, down 31.0 percent from the same period in the
In MY2012/13 cotton yarn production recovery is expected as such cotton imports will increase to 1.6
million bales, up 20-30 percent from the previous year. Additionally, U.S. cotton exports will also
increase 20 percent to 0.6 million bales, after decreasing significantly by 32 percent in MY2011/2012
Section 1: Situation and Outlook for Upland and Value-Added Cotton
Cotton production is insignificant in Thailand, providing less than one percent of total demand. In
MY2012/13 cotton production will likely continue its downward trend as acreage is reduced due to
unattractive returns compared to alternative crops, particularly sugarcane and tapioca (Figure 1).
Planted area will decline to 9,300 rai (1,488 hectares), down 2.0 percent from the previous year, with
anticipated seed cotton production of 1,700 tons. The Government?s ban on transgenic plants remains
in place, effectively eschewing an alternative that could increase returns. In addition, unlike tapioca or
rice, the Government does not have domestic support programs for cotton farmers.
2. Consumption and Marketing
MY2011/12 cotton consumption will continue to decline significantly by approximately 20.0 percent to
1.375 million bales from the previous year due to domestic and global shocks. In 2011, world GDP
slowed down to a growth of 3.3 percent, as compared to a 4.9 percent growth in 2010. The US, which
accounts for 20 percent of total Thai textile and clothing exports, also slowed down to 1.7 percent GDP
growth in 2011, as compared to a 3.0 percent GDP growth in the previous year. The Thai economy
was adversely affected by the widespread flooding in the last quarter of 2011, which resulted in a 9.0
percent contraction in the fourth quarter GDP (Figure 4). Consequently, the overall GDP growth
slowed down to a 0.1 percent in 2011, as compared to 7.8 percent growth in 2010. This led to a decline
in domestic consumption of non-durable goods of non-food items of 1.9 percent in the fourth quarter of
According to the Thai Textile Institute?s flood assessment, around 170 factories were shut down during
the flooding of which 18.0 percent were spinners, 9.0 percent weavers, 12.0 percent home-textile
manufacturers, and 40.0 percent garment manufacturers. These enterprises accounted for 4.0 percent of
the total textile industry. However, 20 percent of the spinning mills had to shut down operations.
Among them was a large synthetic fiber manufacturer whose production accounts for 20-30 percent of
Thailand?s total synthetic fiber production. On the other hand, 3 percent of all weaving and garment
facilities suspended operations. Consequently, total capacity utilization of cotton-fiber spinning mills
dropped to around 45.0 percent in the fourth quarter of 2011, down 21.0 percent from the previous
quarter. In the first half of MY2011/12, total capacity utilization of cotton-fiber spinning mills declined
to 51.0 percent of total capacity utilization, down 31.0 percent from the same period in the previous year
as the flooding aftermath lingered and was accentuated by the global economic slowdown. Also,
capacity utilization of the synthetic-fiber industry declined approximately 50.0 percent. The full
recovery of the spinning mills is unlikely until MY2012/13.
In addition, the textile industry, particularly the labor-intensive garment industry, will likely face higher
production costs as the minimum wage will increase to 300 baht/day, up 43.0 percent from 210
baht/day, effective on April 2012. This increase will affect the export competitiveness of garment
manufacturers as labor cost accounts for around 20.0 percent of the total costs. The Thai Garment
Manufacturers Association expect that the minimum wage increase will result in a 3-6 percent increase
in garment production cost. Also, the increase will hasten the urge of large garment manufacturers to
relocate their facilities to neighboring countries particularly Laos, Cambodia, and Vietnam where the
labor costs are three times lower.
MY2010/11 cotton consumption declined around 3.0 percent from the previous year. The main drivers
of the decline in consumption were the record cotton prices in 2011 due to low inventories. Spinners
reduced their total capacity utilization to around 69.0 percent, down 4.7 percent from the previous year.
As such, production of cotton yarn declined in the second half of the year (Figure 2). In addition,
domestic sales of cotton yarn dropped by 17.0 percent in MY2010/11, particularly in the second half of
the year when sales declined 27.5 percent from the same period in the previous year.
Weavers also cut their capacity utilization by 4.2 percent in the second half of the year due to tight
supplies of cotton yarn and a slowdown in enquiries, as compared to a 3.6 percent increase in their
production capacity in the first half of the year. Consequently, their cotton fabric production increased
slightly by 0.5 percent, much lower than its MY2009/2010 production growth of 10.0 percent.
Meanwhile, polyester yarn production increased 10.0 percent from the previous year as textile
manufacturers increased the polyester proportion in the polyester-cotton blends to lower their weaving
costs. Overall for CY 2010, the market share of man-made fiber increased to nearly 60.0 percent of
total fiber consumption, as compared to 53.0 percent over the past five years (Figure 3).
MY2012/13 cotton consumption is forecast to increase to 1.5 ? 1.6 million bales, up 16.0 percent from
the previous year, in anticipation of the recovery of the spinning mills. The spinners who were affected
by the 2011 flooding expect to rehabilitate their factories during the first half of MY2012/13.
Consequently, their capacity utilization will likely increase to an average of 70 percent from 51 percent
in the previous year, driven by an anticipated strong domestic economic recovery in 2012, as GDP is
forecasted to grow by 5.5 - 6.5 percent.
MY2011/12 cotton imports will likely continue to decline to 1.3 million bales, down 26.0 percent from
the previous year, as spinners retain large inventories of raw cotton purchased at record highs. As prices
started plummeting, most spinners have been negotiating with their shippers to delay the shipments of
forward contracts purchased at record prices while some of them are reportedly cancelling contracts. To
curtail their losses, spinners are also limiting their purchases to cheap cotton for immediate need only,
particularly from India, to blend with their carry-over stocks. This has had the effect of significantly
increasing imports of Indian raw cotton to approximately 50,000 bales in the first half of MY2011/12,
up 15.0 percent from the same period in the previous year, while imports of U.S. raw cotton declined to
around 80,360 bales, down 67.5 percent from 247,100 bales for the same period. Overall, U.S. cotton
imports are expected to decline to 0.5 million bales, down approximately 32.0 percent from the previous
MY2010/11 cotton imports declined to 1.7 million bales, down 3.0 percent from the previous year, due
to high cotton prices driven by tight global cotton supplies and strong import demand from China.
Average import prices of raw cotton soared to a record $2.0/lb in July 2011, as compared to an average
of around $0.7/lb during MY2008/09 ? MY2009/10 (Figure 5). Spinners reduced their average capacity
utilization by 4.7 percent from the previous year. However, import of U.S. cotton increased to 735,987
bales, up 12.2 percent from the previous year, due to limited exportable supplies from other exporting
countries. U.S. cotton?s market share increased to 42 percent, as compared to 36 percent in the previous
MY2012/13 cotton imports are forecast to increase to 1.6 million bales, up 23.0 percent from the
previous year, in anticipation of the recovery of the textile industry and stable world cotton prices. The
spinners, who were affected by the flooding in 2011, expect a full recovery of their production
capabilities in the second half of MY2012/13. U.S. cotton imports will likely increase to 0.6 million
bales, up 20.0 percent from the previous year.
Thailand also exports cotton in form of comber waste, a by-product of spinning medium count yarn
(#30?s - #40?s). Exports of raw cotton from comber waste will likely be insignificant at 1,000 bales in
MY2011/12 due to a reduction in cotton yarn production. The exports are expected to increase to
around 3,000 bales in MY2012/13 in anticipation of a recovery in cotton yarn production.
MY2011/12 cotton stocks are expected to decline to 253,000 bales, down 22.0 percent from the
previous year as spinners will likely run down their inventory as they will limit their purchases only for
immediate needs as they are facing liquidity concerns due to last year?s run-up in prices. They have
also negotiated with shippers to delay the shipments of their forward buying contracts until MY2012/13
as the contracts were made last year at the record highs. Moreover, they still hold large portion of
cotton yarn stocks of which approximately 40-50 percent are high-cost cotton yarn due to the downturn
in textile and garment industry following the domestic and global economic slowdown.
MY2012/13 cotton stocks are forecast to increase to 268,000 bales, up 6.0 percent from the previous
year. The stocks will likely be at normal levels which are around two months use.
Section 2: Statistic Tables
Table 1: Thailand's Production, Supply and Demand for Raw Cotton
T 2010/2011 2011/2012 2012/2013
Market Year Begin: Market Year Begin: Market Year Begin:
Aug 2010 Aug 2011 Aug 2012
USDA New USDA New USDA New
O fficial Post Official Post Official Post
Area Planted 0 2 0 2 2 (1000 HA)
Area Harvested 2 2 2 2 2 (1000 HA)
Beginning Stocks 292 292 322 325 253 1000 480 lb.
Production 4 4 4 4 3 1000 480 lb.
Imports 1,752 1,755 1,300 1,300 1,600 1000 480 lb.
MY Imports from U.S. 0 736 0 500 600 1000 480 lb.
Total Supply 2,048 2,051 1,626 1,629 1,856 1000 480 lb.
Exports 1 1 2 1 3 1000 480 lb.
Use 1,700 1,700 1,350 1,350 1,560 1000 480 lb.
Loss 25 25 25 25 25 1000 480 lb.
Total Dom. Cons. 1,725 1,725 1,375 1,375 1,585 1000 480 lb.
Ending Stocks 322 325 249 253 268 1000 480 lb.
Total Distribution 2,048 2,051 1,626 1,629 1,856 1000 480 lb.
Stock to Use % 19 19 18 19 17 (PERCENT)
Yield 435. 435. 435. 435. 435. (KG/HA)
End of report