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Cotton supply to exceed demand

After jumping up this year by almost 28 percent to a predicted $0.71 a pound, worldwide cotton prices are forecast to subside next year as production outpaces demand. It is estimated that cotton prices will fall to $0.59 a pound, moderately higher than the year-ago level of $0.56 a pound.

In a monthly update of its annual forecast, the International Cotton Advisory Council (ICAC) said high prices are driving plantings higher than sustainable levels of consumption.

During the current cotton year, consumption is still forecast to exceed worldwide demand by about 760,000 tons as mills use about 20.9 million tons, or about 3.8 percent more than the 20.1 million tons expected to be harvested.

Next year, production is expected to surpass mill use of cotton by an estimated 5 percent, or 22 million tons versus 21 million, said ICAC. The shift will come as plantings increase and mill use of cotton is held in check by lower polyester prices, said ICAC.

Preliminary indications, said ICAC, "suggest that cotton area in the Northern Hemisphere will increase 5 percent in 2004/05 to surpass 31 million hectares for the first time since 1995/96."

Simultaneously, cotton area in China is expected to jump up by 10 percent. "Assuming a return of normal weather, production in China is expected to reach a 20-year high of 6.2 million tons, up 1.3 million tons, or 27 percent," from this year's forecast level, said the ICAC.

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

2002/03 (actual) 2003/004 (proj.) 2004/05 (proj.)
Source: International Cotton Advisory Council (ICAC)
Production 19.30 20.10 22.00
Consumption 21.00 20.90 20.90
Cotlook A Price Index 0.56 0.71 0.59


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