ICAC forecasts rising cotton prices in 2013/14
ICAC, International Cotton Advisory Committee, forecasts a 2013/14 world production of 25.6 million tons, while consumption is set at 24 million tons and rising cotton prices for that season
Cotton world trade is estimated in ICAC’s latest bulletin with nine million tons, and world ending stocks hit the record mark of 19.8 million tons, or an eye-popping 83 % of projected mill use. World production will have exceeded consumption by a cumulative 121 million t between 2010/11 and the end of 2013/14, resulting in a doubling of world ending stocks in four seasons.
China’s consumption is earmarked at 8.3 million t, ending stocks at 9.4 million t, of which 7.8 million are in the national reserve, total stocks cover more than one year of use, but the stocks held in the private sector are equivalent to little more than two months of use. The Chinese government had announced that the programme f purchasing cotton from farmers for the national reserve at CNY 20400/t is to continue for the 2013/14 season thus by March 2024 China’s national reserve will rise to around 15 million t, then auctions will reduce the reserve to about 12 t within a year from now. Accordingly, of the estimated world ending stocks of about 20 million tons expected in 2013/14, only eight million will be available for commercial use, and only six million will be held outside China. ICAC estimates that an expected tightening of stocks outside China and for use outside China, a rise in the season average Cotlook A Index from US 88 cents/lb in 2012/134 to more than US one dollar in 2013/14, will take place. TextileFuture adds that this will certainly affect cotton trade and be beneficial to further automation along the cotton value chain, and also influence the business of sophisticated textile machinery.
Cotton production in China is forecasted for 2013/14 unchanged from last season. Production in India might rise a few hundred thousand tons because of a good monsoon season, whereas production in the U.S. is falling because of dry weather in some states, high prices of maize and soybeans, while Pakistan, Brazil, Uzbekistan and most other countries are expected to produce about as much cotton in 2013/14 and at the level of 2012/13.
ICAC sets the mark for world mill use at just 24 million t in 2013/14. As of August 2013, polyester prices in China remain more than US 20 cents/lb below the Cotlook A Index, undermining cotton’s competitiveness in fibre markets. The largest decline in mill use will occur in China, nearly three million t, since 2007/08, while mill use in the rest of the world is expected to increase by 200000 t.
ICAC concludes that the direction of the world cotton industry over the next few years will be determined by policy decisions by the government of China. TextileFuture adds that this is a great word coming from an American institution!