Explanation of Revisions to the China Cotton Balance Sheet - May 2005 WASDE:
This month’s supply and demand estimates for China include a negative residual in the “loss”
column for 1994/95 through 2005/06. This residual signals the likelihood that stocks in China
are larger than the level indicated by USDA’s estimates of supply less demand, due to an
unexplained discrepancy in the underlying data. The balance sheets for the United States,
Australia, and Brazil have similar residuals in some years.
The government of China does not provide an official cotton balance sheet. USDA estimates
China’s supply and demand using China government statistics, to the maximum extent
possible. For the period 1994/95 through 2004/05, USDA’s China production estimate is the
final official estimate released by the China National Bureau of Statistics (NBS). USDA’s
estimates of China’s domestic consumption are based on the NBS yarn production data,
adjusted to derive total use of raw cotton fiber. USDA adopts China customs data for cotton
imports and exports. The May 2005 estimates include revisions in imports for several past
years as reported in the Global Trade Information System.
China’s economy and cotton sector have undergone significant changes since the mid-1990’s.
These changes include the elimination of the floor under government procurement prices, the
participation of non-government entities in cotton trade, the accumulation and subsequent
disposal of large surpluses. During this period USDA has made historical revisions raising
China’s ending stocks three times--April 2000, July 2002, and November 2004. These
revisions were based on evidence of prior crop surpluses from sales of the government reserve
and other relevant information from Chinese sources.
Notwithstanding the earlier historical revisions, there appears to be a persistent error in the
supply-demand balance sheet which tends to understate ending stocks. China’s stocks have
tightened substantially in recent years as surpluses we