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China Loves Cotton

After cotton prices hit a six-year high of 68 cents per pound in 2003/04, triggering a sharp increase in worldwide cotton production, prices are now forecast to fall as much as 23.5 percent, to 52 cents a pound this year. That amounts to good news for a struggling domestic textiles industry, if retailers will just let them keep it.

“Higher prices are boosting world cotton area by an estimated 8 percent in 2004/05,” reported the International Cotton Advisory Council (ICAC), a worldwide consortium of cotton growers.

And with the northern hemisphere harvest now under way without incident, the world production of cotton is forecast to jump 13 percent, from 20.5 million tons last season to a record of 23.1 million tons this cotton year, the cotton cartel reported in a monthly update of its annual forecast. “This would be the largest year-to-year increase in absolute terms since 1984/85.”

Putting downward pressure on cotton prices, said ICAC, are “expectations of rising stocks and of lower imports by China in 2004/05.” And the lower prices, ICAC is forecasting, should stimulate increased worldwide use of cotton this year, with lower cotton prices now competitive with polyester.

“Mill use is forecast up 400,000 tons, nearly 2 percent, to a record of 21.6 million tons this season,” said ICAC.

And most of that increase in cotton consumption will come out of China, said the cotton growers.

“For the fifth consecutive season, China will capture most of the increase in world mill use. Cotton mill use in China is projected to increase to 7.5 million tons in 2004/05, or 5 percent, from last season.

“Mill use in the rest of the world is projected to remain unchanged at 14.1 million tons, the same as it was in 1998/99, when consumption in China was 4.3 million tons,” said ICAC.

World Cotton Supply & Pricing Forecast
(in millions of tons, except for cotton prices)

2003/04 (Actual) 2004/05 (Proj.) 2005/06 (Proj.)
Source: International Cotton Advisory Council (ICAC)
Production 20.49 23.08 22.04
Consumption 1.26 21.63 21.98
Cotlook A Price Index 0.68 0.52 0.53


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