The year-end 2020/21 average of the A Index is forecast at 67 cents per pound

The year-end 2020/21 average of the A Index is forecast at 67 cents per pound

With rising stocks and continuing economic uncertainty, cotton prices are likely to remain low for the near future, a new forecast suggests.

The latest update from the International Cotton Advisory Committee (ICAC) revises the price projection for the year-end 2020/21 average of the A Index to 67 cents per pound. This is marginally higher than last month's 62.8 cents per pound year-end forecast.

The ICAC, an association of cotton producing, consuming and trading countries, believes global recovery will be inconsistent due to countries' varying abilities to deal with the pandemi.

"Although countries around the entire world were plunged into the pandemic almost simultaneously, they will recover at different speeds, based on their ability to contain the virus and restart their economies," it says. 

"The recovery will also be hampered by rising stocks, which will swell even further given that global production (25.1m tonnes) is expected to outpace consumption, even though this is projected to increase by 7.2% to 24.3m tonnes in 2020/21."

The group also points to "some positive signs to feel optimistic about: spinning mills in Vietnam, Bangladesh and India were up to 75% capacity in July, for example. But at the current stocks-to-use ratio of 0.97, there's currently enough cotton in the world's warehouses right now to meet consumption needs for nearly a full year."