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ICAC predicts spike in cotton price

With world cotton production slowing at a double-digit pace this year and consumption on the rise, world cotton prices are forecast to jump as much as 33.5 percent. This puts renewed pressure on margins for U.S. textiles producers who have grown accustomed to the luxury of the lowest cotton prices in decades.

The International Cotton Advisory Committee (ICAC) a consortium of cotton growers around the world, is forecasting production for the 2002/03 cotton year — which runs from September through August — of 19.3 million tons, down 10.3 percent from the 21.5 million tons harvested the preceding year.

At the same time, demand for cotton is accelerating, and forecast to rise by 3.6 percent this year, to 20.8 million tons from 20.1 million tons a year ago.

The laws of supply and demand being immutable and unyielding, prices, said the world cotton cartel, are forecast to rise to 55 cents a pound this year, up by more than a third from last year's 41.2 percent a pound.

Even with the steep run-up in price, cotton prices remain well below the average of 70 cents a pound that prevailed for the past three decades, the ICAC observed.

But with production expected to pick up by almost 8 percent during the 2003/04 cotton year, which begins with September plantings, prices will begin to moderate, rising at a slower pace of just 3.6 percent to 57 cents a pound, said the cotton producers' trade group.

"Plantings in the northern hemisphere in 2003 will start with international prices at their highest level since march 2001," said the ICAC in a monthly update of its annual forecast. "Preliminary indications suggest that cotton area in the northern hemisphere will increase by 1.9 million hectares, or 7 percent this year. Plantings in mainland China are expected to increase by 15 percent this season and production is projected to climb above 5.4 million tons, up 600,000 tons, the highest since 1991/92."

U.S. production is forecast to remain flat at 3.7 million tons, said the cotton growers. And due to higher domestic prices, production is expected to increase in both India and Pakistan. Overall production for the cotton year that begins in September is now forecast to climb by 7.6 percent, to 20.8 million tons from an expected 19.3 million tons this year.

WORLD COTTON SUPPLY AND PRICING FORECAST
in millions of tons, except for cotton prices

2001/02 2002/03 2003/04
Source: International Cotton Advisory Council (ICAC)
Production 21.52 19.30 20.76
Consumption 20.14 20.87 21.19
Cotlook A Price Index $0.42 $0.55 $0.57


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