Cotton sticker-shock dampens demand
December 15, 2003,
With cotton prices soaring sharply higher, generating sticker-shock to suppliers, and at some point to retailers and consumers as well, worldwide cotton consumption is expected to decline for the first time in five years during this 2003/04 cotton season, slipping by an estimated 1.4 percent, or nearly 300,000 tons.
For this year, the cotton consortium is forecasting cotton prices will jump up about 16.7 percent, to $0.65 a pound. But with consumption on the wane in direct reaction to higher pricing, and production still climbing, creating a potential glut of cotton, prices for next year's cotton crop are forecast to give up all of this year's gain and then some, falling back to a level of $0.53, a pound for the 2004/05 cotton crop, even lower than last year's level of $0.56.
"Due to higher prices, world consumption of cotton outside China is expected to stumble from 14.6 million tons last season to 14.2 millions in 2003/04," a drop of 2.7 percent, the ICAC reported. "The gap between production and consumption in countries outside China is decreasing by an estimated 800,000 tons compared to last season."
Putting further downward pressure on cotton prices going forward, China, after consuming an ever-larger share of the world supply of cotton, is expected to start producing more of its own cotton, and importing less from the U.S. and other nations, making even more cotton available on the worldwide marketplace," the ICAC forecast.
As China produces more of its own cotton, its net imports are forecast to decline to 950,000 tons, down about 200,000 tons.
As a result of the lower worldwide consumption, and a lower anticipated rate of imports from China, said ICAC, prices are "projected to drop to $0.53 per pound in 2004/05, down $0.12 from the projected average for this season," a decline in price of 18.5 percent.
WORLD COTTON SUPPLY AND PRICING FORECAST
(in millions of tons, except for cotton prices)
|Source: International Cotton Advisory Council (ICAC)
|Cotlook A Price Index||$0.56||$0.65||$0.53|
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