Recent price movement

Both NY futures and the A Index rose and fell over the past month， with current values nearly equal to those from one month ago. Other benchmark prices were generally stable.

· After gaining several cents/lb in the second half of February， NY futures turned lower， with the May contract falling from 65 cents/lb in late February to 62 cents/lb in the most recent trading.

· The A Index reached values as high as 72 cents/lb in late February but has since dropped below 70 cents/lb.

· The CC Index was unchanged over the past month， with prices holding to levels near 98 cents/lb in international terms and between 13，435 and 13，475 RMB/ton in domestic terms.

· Indian spot prices for the Shankar-6 variety held to values near 63 cents/ lb in international terms and near 30，700 INR/candy.

· Pakistani spot prices held to values between 58 and 60 cents/lb in international terms and between 4，850 and 5，050 PKR/maund in local terms over the past month.

Supply， demand， & trade

The latest USDA report included only minor revisions to global estimates for 2014/15 production and mill-use. The figure for world production was lowered only 130，000 bales （from 119.4 million to 119.2 million） and the figure for world consumption was lowered 290，000 bales（from 111.3 million to 111.0 million）. The forecast for global ending stocks increased 223，000 bales （from 109.8 million to 110.1 million）.

At the country-level， notable revisions to harvest projections were for Tajikistan （-100，000 bales， to 350，000） and Pakistan （+100，000 bales， to 10.5 million）. Country-level revisions to mill-use figures included those for China （-500，000 bales， to 35.0 million）， Bangladesh （+100，000 bales， to 4.5 million）， Indonesia （+100，000 bales， to 3.3 million）， and Vietnam （+100，000 bales， to 3.7 million）. This months reduction to the Chinese consumption estimate was the fifth consecutive decrease. The current forecast of 35.0 million bales indicates that only a small increase in Chinese consumption （+500，000 bales versus 2013/14） is expected to accompany the nearly 50 cents/lb drop in Chinese cash prices that has occurred over the past twelve months.

In terms of trade， the largest revisions included those for the Brazilian export forecast （+350，000 bales， to 3.8 million） as well as import estimates for Vietnam （+150，000 bales， to 4.0 million）， Bangladesh （+100，000， to 4.6 million）， and Indonesia （+100，000， to 3.4 million）.

Price outlook

Late last month， the USDA released a preliminary partial set of projections for world supply， demand， and trade for the upcoming 2015/16 crop year （the first complete set of forecasts will be released in May）. These figures suggest that lower cotton prices experienced in the current crop year will result in lower acreage and production in virtually all major production countries next season. The largest reduction in production is forecast for the U.S.， where it is expected to drop a little more than two million bales （from 16.1 million in 2014/15 to 14.0 million in 2015/16）. China is also expected to experience a decline in production near two million bales（from 30.0 million in 2014/15 to 28.0 million in 2015/16）. India is expected to have a comparatively small decrease in production next crop year， with the harvest expected to be only about half a million bales less than in the current season， and should solidify its position as the worlds largest producer. Other major production countries/areas， including Pakistan， the African Franc Zone， Turkey， Brazil， and Egypt， are all predicted to experience production declines of half a million bales or less.

In terms of mill-use， the USDA is expecting a relatively strong increase of 4.7 million bales （4.2%）. If realized， this would be nearly twice the long-term average annual growth rate. Underlying the expectations for stronger growth in mill-use next crop year are cotton prices that have shifted significantly lower and forecasts for world economic expansion that have been moving higher. At the countrylevel， the largest increase in global mill-use is expected to occur in China. The USDA theorizes that as the separation between Chinese prices and prices outside of China narrows additional Chinese spinning capacity will be put into operation. However， it should be noted that the USDAs figure for the current crop year has been successively scaled back in recent months. These reductions may be the result of lower Chinese prices not materializing into increased mill-use as initially projected. The USDAs preliminary estimate for Chinese consumption in 2015/16 is 37.5 million bales， which would represent a 2.5 million bale increase relative to their current figure for 2014/15.

The projection for a strong expected increase in milluse， along with the expected reduction in production， is forecast to result in the first production deficit in five crop years. The size of the shortfall is predicted to be about three million bales， which would result in global ending stocks near 107 million bales. Although this volume is slightly lower than the 110 million bales expected to be carried forward from the current crop year， it remains an enormous amount of cotton by historical standards. Correspondingly， the downward pressure on prices posed by supply-related forces this crop year could be expected to continue into 2015/16.