Global cotton production is expected to fall at a greater rate than first thought in the 2018/19 season, drawing down world stocks and triggering the fourth straight year of decline.
According to forecasts from the International Cotton Advisory Council (ICAC), global production is likely to fall by 3% to 25.9m tonnes, lower than the 2% drop to 26.1m tonnes forecast provided in January. Consumption is expected to remain steady at 26.8m tonnes, while world stocks are projected to drop to 17.6m tonnes, reflecting a decrease of 5% from the prior year and registering the fourth consecutive year of decline.
In the opinion of the inter-governmental body, cotton prices have come under pressure – but this is largely due to the effects of uncertainty related to the global economic environment, as opposed to the impact of trade barriers.
That said, price fundamentals still look solid, as reflected in the price forecast for 2018/19 at an average of 87 cents per pound as measured by the Cotlook A index. This compares with 88 cents/lb in 2017/18 and 83 cents/lb in 2016/17.
Meanwhile, production in China is expected to increase 1% to 5.94m tonnes. When combined with a 7% decline in India’s production due to insufficient rainfall, China will regain the ‘top producer’ title it lost to India in the 2015/16 season.
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By GlobalData