The latest data to come out of the US forecasts another drop in global demand for cotton as ongoing economic uncertainty and a shift to man-made alternatives continue to weigh on future purchases of the fibre.

Revising the figures released last month, the US Department of Agriculture (USDA) now sees demand dropping by another 2.6% to 111.3m bales in the 2011/12 season, which began on 1 August, down from the previous projection of 114.3m bales.

The drop in demand, coupled with relatively stable world production, is set to put the production surplus projection for the year at 12.1m bales. This is the third largest on record, behind 12.5m bales in 2004/05 and 17.9m bales in 1984/85.

The revisions also lift the stocks-to-use ratio from 48.1% to 51.8%, the highest level since 2008/09.

The government's forecast sees a 473,000 bale drop in the size of the expected harvest from the US, the largest exporter, to 15.8m bales.

While reductions for major consuming countries include a 1m bale drop for India, along with China (-500,000 bales), Turkey (-500,000), Brazil (-100,000), Bangladesh (-150,000), the United States (-200,000), and Indonesia (-200,000).

Meanwhile, Cotton Incorporated notes that mounting uncertainty about the global economic situation pushed a range of commodity prices lower in late November - with the March New York futures contract for cotton briefly dropping below 88 cents/lb before settling into a new range between 90 and 94 cents/lb.

A Index values also declined and fell below 100 cents/lb for the first time since September 2010, it said.

However, while mill demand for the fibre remains weak, the Chinese reserve system has been an active buyer, with the Chinese government purchasing an estimated 8.8m bales of domestic and US cotton.

With this cotton being withheld from the market, Chinese government purchases will have counteracted some of the downward pressure on prices from the combination of a record global harvest and weak mill demand, Cotton Inc notes.

Last week inter-governmental group the International Cotton Advisory Committee (ICAC) forecast an 8% reduction in world planted cotton acreage for the 2012/13 harvest, as falling prices make it less attractive than other crops.