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Double-Digit Price Hike Ahead in Cotton

Worldwide textile mill demand for cotton is expected to once again run ahead of production this year, putting continued upward pressure on the price of the raw material, which is now expected to climb by roughly 5% this year, to $0.59 a pound, before jumping up at an even faster pace, by more than 13%, a year from now.

The International Cotton Advisory Council (ICAC), a worldwide consortium of cotton growers, said it expects demand to outstrip production again this year despite a steep 28% hump in cotton production in South American nations. In a monthly update of its annual cotton supply, demand and pricing forecast, the cotton growers said they expect demand to climb by 4.1% this year, to 26.0 million tons, while cotton production grows at a slower pace of 2.6%, to 25.3 million tons.

With the imbalance continuing into next year, cotton prices are set to jump up at a double-digit pace next year, advancing by 13.6%, to $0.67 a pound from the $0.59 forecast for all of this year.

Worldwide cotton growth is forecast to climb only moderately this year, by somewhat more than 4%, even though South American cotton production, led by Brazil, is forecast to rise by 28% to a record 1.7 million tons. Production, the growers said, is expected to increase by 33% in Brazil, to 1.4 million tons, but is forecast stable or down in most other South American countries.

China is expected to continue to drive worldwide mill use and imports, and with them higher prices, both this year and next, said the cotton growers.

(in millions of tons, except for cotton prices)

2005/06 (ACTUAL) 2006/07 (PROJ.) 2007/08 (PROJ.)
Source: International Cotton Advisory Council (ICAC)
Production 24.7 25.3 25.4
Consumption 25.0 26.0 26.6
Cotlook A Price Index $0.56 $0.59 $0.67

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