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Cotton prices may drop

Production to rise 8 percent to 21.9 million tons

Don Hogsett -- Home Textiles Today, May 10, 2004

With world cotton production on the rise and consumption holding relatively steady, cotton prices are expected to dip modestly — by roughly 4 percent for the cotton-crop year which begins Aug. 1 — to an average of 67 cents per pound, down from 70 cents this year, the International Cotton Advisory Council is projecting.

In a monthly update of its annual pricing forecast, the worldwide consortium of cotton growers said stepped-up competition from low-priced polyester is holding the lid on cotton consumption, even as production rises, putting downward pressure on pricing.

The worldwide production of cotton is expected to rise by about 8 percent next season, to 21.9 million tons from 20.2 million for the current crop year. That's more than 500,000 tons above the relatively flat consumption levels that the cotton cartel is now forecasting.

Held in check by the rising popularity of lower-cost polyester, the worldwide consumption of cotton at the textiles-mill level is expected to come in at 21.3 million tons next year, up just two-tenths of a percentage point from 21.27 million tons for the cotton year which ends July 31.

Putting further downward pressure on cotton prices, imports by China are projected to decline next season, by almost 12 percent, to 1.5 million tons from 1.7 million tons this year, reversing a trend of rapidly accelerating Chinese cotton imports.

Surveying the economic landscape, the cotton growers' consortium said, "The textile industry will be positively affected by higher economic growth and by the elimination of quotas on textiles and apparel trade after Jan. 1, 2005. However, cotton's market share continues to erode because polyester remains cheaper than cotton."

Hard hit by polyester pricing, worldwide use of cotton is expected to nudge up by just two-tenths of 1 percent for the cotton year beginning in August, and by roughly 1 percent for the following year, the ICAC is forecasting.

WORLD COTTON SUPPLY AND PRICING FORECAST
(in millions of tons, except for cotton prices)

2003/04(actual) 2004/05(proj.) 2005/06(proj.)
Production 20.24 21.85 22.22
Consumption 21.13 21.31 21.56
Cotlook A Price Index $0.70 $0.67 $0.61
Source: International Cotton Advisory Council (ICAC)


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