There is for sure a high degree of mystery regarding most of the statistics emerging from China’s cotton and textile sectors. The latest debate has been centered on possible stock levels and the belief that cotton production could have been underestimated. Adding even more to the enigma is the data regarding cotton consumption, which is estimated by using the yarn production estimate and then attempting to arrive at a market share for cotton.

There is overwhelming evidence that cotton consumption in China is rapidly expanding. One reason is fixed asset investment in the sector, with 2007 continuing the record pace of 2005 and 2006. January through April 2007 investment, according to CTSC, reached 56.951 billion yuan, which represented 28.43 percent growth, while investment in cotton textiles reached 17.401 billion yuan, which reflected 29.12 percent growth. Then there is the host of textile production data. Total yarn production expanded 20 percent in January through April to a record 5,781,995 tons. Fabric output grew 12 percent to 14.482 billion meters, while cotton fabric output increased 14 percent to 7.941 billion meters. Total apparel output in January through April grew 14.5 percent to 5.537 billion units. We can even follow the expansion to retail sales, where apparel sales are growing near 25 percent annually.

Against this backdrop, the debate is over cotton’s share of this expansion. In 2007, the National Bureau of Statistics (NBS) expanded their release of data. Through Globecot’s Chinese joint venture partnership, we have been receiving data that fully breaks down fabric and apparel output by sectors. For fabric, we monitor 100 percent cotton, cotton-blend and MMF fabric, etc., in addition to total fabric output. The similar data on yarns just recently became available, and it reveals that cotton’s market share of yarn production is clearly larger than anyone’s calculations; but unfortunately, the data does not reveal a truly accurate number. Let’s work through the numbers to illustrate this -- 100 percent cotton yarn output, which is defined as at least 95 percent cotton, is estimated at 4,563,291 tons. This is a shocking number that would imply a market share for cotton of over 78 percent after adjustments. Blend yarn production is estimated at 775,903 tons.

If one were to assume that cotton-blend yarn is 50 percent cotton, then add the 100 percent cotton yarn and you reach 4,951,242.5 tons or a strong 85.63 percent market share for cotton. Adjusted back to reflect only 95 percent cotton in the 100 percent yarn output estimate would reduce cotton’s market share to 81.68 percent.

This market share is astounding to those working off the general range of 55 to 61 percent. To put some historical context behind the estimate, the Ministry of Textiles previously published cotton’s market share of yarn production, which ranged from 75 to 84 percent during the 1985 - 1991 period, after which it was no longer published. Recently, a 64 percent market share has been used by some, because it has been referred to in official textile ministry speeches and other documents. From this percentage, downward adjustments have been made based on various factors; however, looking back at historical data indicates that a market share of 81 to 82 percent has occurred in the past.

If the 81.68 percent market share implied by these numbers is used to estimate cotton consumption, then the cotton consumption estimate arrived at is even more shocking. An 81.6 percent market share would result in January through April cotton yarn output of 4,722,733.5 tons. Assuming a cotton waste factor of 4 percent, this would imply cotton use during the four-month period at 4,911,642.8 tons; and when this is annualized, it would reflect total cotton use of 14,734,928 tons or a mind boggling 67,699,626 480-pound bales.

Such an estimate compares to today’s USDA’s forecast of 50 million bales used in 2006/07. What the estimate does is reinforce the suggestion that cotton consumption in China is being underestimated. The question is by how much? When a one percent shift in cotton market share of 100 percent and blend yarn equals 143,744 tons or over 660,000 bales, small changes mean significant volume. Obviously the NBS textile statistics have some errors. Globecot’s constant monitoring of the data over the past few years for fabric and other textile products have seen that they are subject to major revisions, both monthly and annually. It should be rendered that the NBS is spending millions of yuan on the surveys and tabulations; thus, the data is seriously arrived at with great effort. However, it’s clear that the yarn data needs some significant revisions and adjustments in order to provide a clear picture of cotton consumption. The access to adequate data is important to all, including decision-makers in China.

For the cotton market, what we do know is that cotton consumption in China was larger than 50 million bales in 2006/07, and it will continue to expand in 2007/08. This conclusion adds even more uncertainty as to cotton stock levels and production data.