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Cotton picks good time to drop prices

WASHINGTON, D.C. -In a big dose of good news for an industry that sorely needs it, world cotton crops are now forecast to come in higher than expected in 2001/02, pushing cotton prices down to about 56 cents a pound after a run-up to an average of 60 cents a pound this year.

With cotton production forecast to reach 20.3 million tons in 2001/02, about 50,000 tons above consumption, the International Cotton Advisory Council projects that prices this year will be hard pressed to break above 60 cents a pound, and forecasts a drop to about 56 cents next year.

That's good news for an industry that's having a tough time making money, and which has seen cotton prices jump up almost 14 percent this year, to about 60 cents a pound from slightly less than 53 cents a year ago.

In an unscheduled update of the world cotton situation issued on March 19, the ICAC, a consortium of cotton producing nations, said, "Price projections for 2001/02 have changed radically over the last two weeks as a result of changes in estimates of world production and consumption. With cotton crops coming in stronger than expected, world production is now expected to substantially surpass demand, said the ICAC, resulting in lower prices for American textile mills.

"Although most of the changes since last month have taken place in mainland China, higher production estimates in Australia and lower consumption estimates in Japan and Italy for 2001/02 result in an increase of the stocks-to-use ratio outside mainland China from 40 percent this season to 41 percent in 2001/02, one percentage point more than previously estimated," said the ICAC.

Based on the latest data from China's State Statistical Bureau, growth estimates for mainland China have been increased by 450,000 hectares to 4.6 million hectares, and production is now projected to reach 4.7 million tons, 300,000 higher than previously forecast.

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


1999/00 (actual) 2000/01 (proj.) 2001/02 (proj.)

Production

18.82

18.97

20.33

Consumption

19.75

19.82

20.28

Exports

6.13

6.02

6.11

Ending Stocks

8.89

8.03

8.08

Cotlook A Price Index

0.53

0.60

0.56


Source: International Cotton Advisory Council (ICAC)

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