U.S. 2015/16 cotton output to drop, but demand slump persists - Cotlook

NEW YORK (Reuters) - U.S. cotton production will fall to 2.8 million tonnes in the 2015/16 crop year, industry analysts at Cotton Outlook (Cotlook) said in a report on Thursday, just one week after a bullish U.S. government crop forecast sent prices soaring.

The forecast production decline, however, was outweighed by a cut in Cotlook's projection for world consumption, to 23.9 million tonnes, down 305,000 tonnes from its July estimate, due to a downward revision in its forecast for the Indian subcontinent's consumption by 200,000 tonnes to 9 million tonnes.

The end result will be a reduction in global inventories of 584,000 tonnes by the end of the year, smaller than the 597,000 tonne reduction it anticipated last month, Cotlook said.

The cotton market is suffering from massive global inventories, primarily a result of years of stockpiling in top-consumer China.

Cotlook's 335,000-tonne reduction in U.S. output was partly outweighed by an increase in India's output, resulting in a net decrease in its forecast for world production by 292,000 tonnes to 23.4 million tonnes.

The slash in U.S. output comes on the heels of a monthly U.S. Department of Agriculture report that reduced forecasts for U.S. production and inventories by the end of the 2015/16 crop year, which began this month, by more than market expectations, contributing to a sharp increase in prices.

(Reporting by Luc Cohen; Editing by Dan Grebler)