Cotton crunch looms
July 5, 2007,
Washington -- After rising an average of 3.5% so far this year, cotton prices are set to jump up sharply higher next year, rising almost four times as fast, by more than 12%, to an average $0.65 a pound, said worldwide cotton growers in an update of their annual supply, demand and pricing forecast.
Prices for the upcoming cotton growing year are accelerating at an unexpectedly rapid pace, and only two months ago were forecast to climb at a far more modest pace of 6.4%, little more than half the 12.1% increase now expected, said the International Cotton Advisory Council (ICAC), a worldwide consortium of cotton producers.
The ICAC pricing index "has increased significantly since mid-May 2007," said growers in their July report. "Domestic Chinese prices also increased in June due to tighter domestic supplies and increased domestic demand."
Also: "A continued increase in Chinese domestic prices could result in sales of reserve stocks by the China National Cotton Reserve Corporation and/or increased Chinese imports," which could put even more upward pressure on cotton pricing.
Cotton production is forecast to slip next year by 1.6% to 25.3 million tons, down from about 25.7 million tons during the current cotton season. Demand, on the other hand, is forecast to climb by 650,000 tons, or 2.7% next year, to 26.9 million tons form 26.2 million tons this year, said the cotton cartel.
"Asia is expected to consume 4% more cotton in 2007/08, whereas the rest of the world is expected to consume 4% less."
With so much demand for the basic raw material of apparel and home fashions, "World cotton ending stocks are forecast to decrease by 13% in 2007/08, to 10.6 million tons," further reducing supplies.