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Cotton Prices Predicted To Plummet

Don Hogsett -- Home Textiles Today, January 31, 2005

Washington — With world cotton production forecast to hit a record high this year, far outpacing consumption and producing an inventory glut, cotton prices are now forecast to skid by an average of almost 30 percent for the 2004/2005 cotton year, to 48 cents a pound from 68 cents a year ago, the International Cotton Advisory Council reported in a monthly update of its annual supply and pricing forecast.

Cotton prices surged sharply last year, hitting a six-year high of 68 cents a pound, triggering a sharp increase in worldwide production, the cotton cartel reported.

Indeed, the surge in production is now expected to produce a record of almost 25 million tons this year, up 4.2 million tons, or 20 percent from the previous cotton season. Cotton consumption is expected to increase as well, but not nearly as fast as cotton production, rising at a far more sluggish pace of 6.4 percent, to 22.5 million tons from 21.2 million last year.

With production racing ahead of consumption, stocks are projected to swell by 2.3 million tons this season, and will surpass 10 million tons by the end of July, said the ICAC. The laws of supply and demand being immutable, that's putting tremendous downward pressure on cotton prices.

But the pricing situation is expected to right itself the following year as supply and demand come into better balance, the cotton consortium forecast.

“Declining cotton prices in 2004 will curtail plantings and stimulate cotton mill use in 2005/06, producing a price increase in 2005/06 to about 59 cents a pound,” stated the ICAC.

World Cotton Supply & Pricing Forecast
(in millions of tons, except for cotton prices)

2003/04 (Actual) 2004/05 (Proj.) 2005/06 (Proj.)
Source: International Cotton Advisory Council (ICAC)
Production 20.65 24.87 22.53
Consumption 21.18 22.53 22.92
Cotlook A Price Index 0.68 0.48 0.59


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