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Cotton Price Projection: Up 20% Next Year

Taking another bite out of the bottom line of home fashions producers, world cotton prices are expected to soar sharply higher next year, running up by more than 23.0%, as demand for cotton rises and production flattens out.

In a monthly update of its annual cotton production and pricing forecast, the International Cotton Advisory Committee (ICAC), a consortium of world-wide cotton growers, said prices during the upcoming 2006/2007 cotton season could average as high as $0.69 a pound, up almost a fourth from the average of $0.56 this year.

That marks a major run-up in price from the far more moderate increase in the range of 8.0% that textile mills are expected to pay on average this year, $0.56 a pound, up from $0.52 a year ago.

Pushing prices higher is the immutable law of supply and demand — in this case rising demand, but no new production, said the cotton cartel. Worldwide demand is forecast to rise by an estimated 3.2% to a level of 25.7 million bales, up from 24.9 million this year. But worldwide production is flattening out — even falling sharply in some countries, including the United States —and is expected to settle in at 25.0 million tons next year, only slightly above this year's forecast of 24.8 million tons.

In worldwide trends, U.S. cotton production is forecast to drop 14.0% next year, while rising 6.0% in China, mostly due to an expected increase in cotton cultivation area. Production in India is forecast to rise by 5.0%, while Pakistan could gain by 8.0%.

Mill use of cotton is expected to jump up by 6.0% in China, India, and Pakistan combined; these three nations account for roughly two-thirds of the world's textile mill use of cotton.

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