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Cotton prices continue to climb

World cotton production is forecast to slide by more than 10 percent this year, with demand climbing higher by almost 3 percent — and the resulting imbalance means world cotton prices are expected to shoot up by 26.8 percent this year, and another 7.5 percent the following year, according to an updated forecast by a world consortium of cotton growers.

The International Cotton Advisory Committee, a group of 42 cotton producing and consuming nations, said cotton production is set to fall to 19.3 million tons this season, down from 21.5 million tons last year, according to the International Cotton Advisory Council (ICAC). The world cotton growing area, said the group, is declining by 7 percent to an estimated 31.12 million hectares in the 2002/03 cotton year, "the lowest since 1993/94."

At the same time, the world average yield is expected to decline from an all-time high of 640 kilograms per hectare in 2001/02 to 619 kilograms per hectare, the second highest on record. As a result, world production is expected to fall by 2.2 million tons, from a record of 21.5 million tons last season, the cotton growers are now forecasting.

Low cotton prices helped to boost world cotton mill consumption by 1.9 percent last year, to a record 20.1 million tons, "thanks to the booming textile industry in China." World mill consumption is expected to increase another 2.8 percent during the current cotton year, which runs from September 2002 through August 2003.

But the health of the U.S. and European economies remains problematic and could act as a drag on future consumption, the ICAC noted.

And the competition is likely to intensify with the phasing out of all quotas on textiles and apparel by Jan. 1, 2005, the cotton growers noted. "A quota-free world will mean lower-priced garments and it is expected that half of the 150,000 existing export factories worldwide will almost certainly fail, as the other half has the capacity to meet all the demand."

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

2001/02 (actual) 2002/03 (proj.) 2003/04 (proj.)
Source: International Cotton Advisory Council (ICAC)
Production 21.48 19.32 20.23
Consumption 20.14 20.71 20.98
Cotlook A Price Index $0.42 $0.53 $0.57


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