WORLD: Cotton prices to decline as demand slows
Cotton experts have lowered their estimates for cotton consumption growth this season, and say cotton prices are expected to see a "significant decline" over the next year as production increases help to replenish stocks.
Inter-governmental group the International Cotton Advisory Committee (ICAC) believes world cotton mill use will grow by just 1.5% in 2011/12 to 24.7m tons, after a 4% drop in 2010/11. This compares to a rise of 3% forecast in July.
It says increased availability of cotton will be kept in check "by still relatively high cotton prices and competition from chemical fibres," warning too that "the possibility of a double-dip global economic recession could reduce these expectations."
China, India and Pakistan will drive the increase in cotton mill use in 2011/12.
On the production front, a rise of 8% to 26.9m tons is expected in 2011/12, making this the largest crop since 2004/05. Increases will be driven primarily by China, followed by India, Pakistan, Australia and Turkey.
China's production is expected to rise by 13% to 7.2m tons, India's by 9% to 6.0m tons, Pakistan's by 19% to 2.3m tons, Australia's by 23% to 1.1m tons, and Turkey's by 42% to 641,000 tons.
A rebound in imports will be fuelled by larger crops, higher consumption, and the rebuilding of the Chinese government reserve, leading to a rise of 7% to 8.1m tons.
Exports will be led by Australia and Brazil - both of which harvested a record crop in 2010/11 and will ship most of it in 2011/12 - as well as India. But US exports are expected to be down by 20% to 2.5m tons, thanks to the severe drought in Texas.
As a result of the expected surplus of 2.2m tons, global world ending stocks could rebound by 24% to 11.2m tons in 2011/12.
The group said that the projected increase in the stocks-to-use ratio - a key measure of the commodity's availability - outside China could translate into a significant decline in the season-average Cotlook A Index.
This doubled to a record high of US$1.64 per pound in 2010/11, but is still likely to remain above the average of $0.60 per pound during the last decade.
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