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Cotton Demand, Price Stabilizing

Drop in Chinese Demand Putting a Cap on Prices

The worldwide price of cotton is expected to hold relatively steady this year, edging up just 1.8% to $0.57 a pound, as consumption of the raw material, while still strong, is growing at a more subdued pace than a year ago.

In a monthly update of its annual cotton supply, demand, and pricing forecast, the International Cotton Advisory Council (ICAC) said a slowing rate of growth in demand for cotton, and a drop in demand from Chinese textiles producers, is putting a cap on prices.

The consortium of 42 governments of cotton producing and consuming nations said, "The rate of increase in global consumption has slowed from an impressive 8% increase in 2004/05 to 6% in 2005/06, and is projected at 4% in 2006/07."

World cotton production this year is forecast at 25.1 million tons, about 2% higher than during the last cotton growing season, making it the second most productive season to date.

With demand moderating somewhat, and China scooping up less of the world supply of available cotton, world cotton trade is forecast to decline by 7% this year to 9.0 million tons, still the second highest on record. The main reason for this projected decline is an expected 15% drop in Chinese imports to 3.6 million tons, "whereas imports by other consuming countries are forecast stable."

Even with the big drop in demand from China, that country is expected to import an amount equivalent to more than 14% of all the cotton produced in the world — in addition to what it can produce itself.

World Cotton Supply and Pricing Forecast
(in millions, except for dollars)

2005/06 (ACTUAL) 2006/07 PROJ.) 2007/08 (PROJ.)
Source: International Cotton Advisory Council (ICAC)
Production 24.7 25.1 25.1
Consumption 24.8 25.9 26.4
Cotlook A Price Index $0.56 $0.57 $0.63

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