Cotton Prices to Rise

Don Hogsett, December 19, 2005

Washington, D.C. — As China continues to absorb much of the world’s available cotton supply, making it in short supply elsewhere, cotton prices are poised to climb sharply higher this year, by as much as 24 percent, to an average level of $0.65 a pound for the cotton year, from $0.52 a year ago.

The International Cotton Advisory Council (ICAC), a consortium of worldwide cotton growers, said that over the last 20 years, the single most important variable affecting cotton prices haws been cotton imports by Mainland China. Driving prices up this year, “Chinese cotton imports are forecast at a record 3.2 million tons, more than double last year’s imports,” said the ICAC in a monthly update of its annual production and pricing forecast.

That means that between what it imports and what it grows itself — an estimated 5.8 million tons this year — China will account for more than a third, roughly 36 percent, of the world’s entire supply of cotton, estimated at 25 million tons this year, said the world cotton cartel.

While prices for the entire cotton year are projected to shoot up to an average of $0.65 a pound, prices have been slow to rise so far. During the first four months of the new cotton year, prices averaged only 55 cents a pound — suggesting a rapid acceleration in price over the next six to eight months.

The world production estimate of 25 million tons is about five percent less than last season, but still the second highest on record. The estimated Mainland China production of 5.8 million tons is “about nine percent less than last season due to decreased plantings and yields,” said ICAC. Production in the U.S. is estimated at about five million tons, roughly the same as last year.

Elsewhere, said the cotton growers, production in India is expected to rise about three percent to 4.25 million tons “due to increased planting,” itself “a result of the significant increase in productivity last season.” But production in neighboring Pakistan is forecast to fall by 11 percent, “due to decreased yields as weather conditions have been less favorable than last year.”

Production in Brazil, Australia and Argentina is expected to decrease sharply, due mainly to the current relatively low price of cotton. Cotton production in the southern hemisphere “could fall to 2.2 million tons this season, 400,000 tons less than last season,” the ICAC reported.

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