WORLD: Cotton prices remain high despite excess production
The Cotlook A Index for January has averaged 91 cents per pound
The forecast for global cotton inventories at the end of the 2013/14 crop year has been lifted again, despite an expected decline in production and a slight rise in consumption.
The latest projection from the International Cotton Advisory Committee (ICAC) says world ending stocks are likely to be 19.9m tons, more than 2m tons higher than last season.
The inter-governmental body also notes that despite the excess of cotton stock in the world, the Cotlook A Index for January has averaged about 91 cents per pound, up from 85 cents per pound seen in November and early December 2013.
This is partly due to cotton stockpiling by China, which has removed much of the excess cotton from the world market.
Given China's share of world cotton stocks, if it decides to offload its reserve stock onto the world market, price is expected to decrease, the ICAC warns. At the end of 2013/14, China is expected to hold 58% of world stocks with an expected ending stock of 11.5m tons.
As reported on just-style yesterday (3 January), plans by the Chinese government to replace the national cotton reserve programme with a system of subsidies have been welcomed by local cotton producers.
In particular, the scheme has kept the price of Chinese cotton so high that it has seriously undermined the competitiveness of Chinese textile companies in the global market.
According to the ICAC forecast, world cotton production in 2013/14 is seen at 25.7m tons, a drop of 4% from 2012/13 and 8% from peak production of 28m tons in 2011/12.
This is due mainly to lower yields and less area planted with cotton. The world average yield in 2013/14 is forecast at 777 kilograms per hectare, down 2% from last season and world area is forecast at 33.1m tons, also down 2% from last season.
World cotton mill use is projected up by 1% this season to 23.6m tons, reversing the downward trend in cotton consumption since 2009/10.
World cotton mill use should continue to grow in 2014/15 (by 4%) if the health of the global economy continues to improve. The International Monetary Fund's latest projections, published in January 2014, indicate world economic growth at 3.7% in 2014, up from 3.0% in 2013 and 3.1% in 2012.
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