The numbers are mind-boggling, says Hank Reichle: 85.5 million bales of world cotton stocks for the marketing year ending July 31, the second largest ever, and a year from now, 95 million bales — “by far the largest we’ve ever seen.

“Right now, 86 percent of next year’s projected world consumption is already sitting in the world’s warehouses,” he said at the joint annual meeting of the Delta Council Ginning and Cotton Quality Improvement Committee and Southern Cotton Ginners Association.

Those numbers would normally be “so bearish, it’s unbelievable,” says Reichle, vice president of export sales and market administration for Staple Cotton Cooperative Association at Greenwood, Miss.

But it’s not as bad as it otherwise would be with such staggering stocks-to-use figures, he says, because “the Chinese government owns most of that cotton, and in the rest of the world — the U.S., India, Pakistan, everywhere else — stocks are relatively low. China represents about 30 percent of the world’s cotton consumption, and while that’s a lot for just one country, the other 70 percent of mill use is outside of China.

“In the rest of the world, there’s not an excess of cotton, and as long as China is willing to hold all that cotton off the market, it helps keep world cotton prices much higher than they would be otherwise.”

In the years ahead, Reichle says, China will have “a tough balancing act” in determining how to work its way out from under that massive oversupply.

The situation is a marked contrast, he says, to the early 2000s, when cotton was trading for 50 cents to 60 cents a pound, with a precipitous drop to 28 cents in 2001.

“Then it started to creep back up, and in 2009 mill use exceeded production by 17 million bales. We had a true fundamental rally that year, from about 48 cents a pound to more than 90 cents a pound — a lot of demand for cotton and not a lot being grown.

“The market didn’t stop at 90 cents or even the long-dreamed-of $1; it went to $2 a pound. Unfortunately, producers didn’t benefit from the $2 price, and it hurt consumption. The price dropped back to 70 cents a pound.

“That volatility caused two things to happen — growers planted a lot more cotton and mills used a lot less. Anytime there are big increases in production without a corresponding increase in consumption, you’re going to add to supply, and that’s why we now have such a global oversupply.

“In 2011, we had a world high production of about 124 million bales; a farmer could book cotton at $1.40 a pound before he even grew it. But consumption was going down. And while we’ve reduced production, we’re still way off our usage highs; our problem now is not production, but rather lack of consumption.”