Cotton production down but high stocks reining prices: ICAC
After five consecutive seasons of excess supply, overall global production of cotton has fallen below the estimated consumption in the 2015-16 season but international prices continue to remain weak due to very high levels of stock, the International Cotton Advisory Committee (ICAC) has said .
Notwithstanding a slew of support measures by governments across the world that touched a record $10.4 billion in 2014-2-15, production of cotton was below demand, ICAC said in a statement released at the conclusion of its 4-day 74th Plenary meeting in Mumbai.
Large stocks accumulated as a result of governments' intervention from 2011-12 to 2014-15 would remain the key factor in determining the fundamentals of the cotton market for the foreseeable future, it said observing that demand for cotton continues to expand at a slow rate as a result of sluggish world economic growth and strong competition from synthetic fibers, especially polyester.
In order to improve the prospects for cotton, the ICAC endorsed the recommendations of its Private Sector Advisory Panel, foremost being to ensure that fiber-content labels on textile products were more visible so that consumers could make informed choices, and also promote transparency in the supply chain.
The committee also favoured conducting a study on the economic factors underlying the growth of polyester production and demand, to enable members to better understand the dynamics of competition among fibers. It also advised members to encourage an increased diversification of the uses of cotton, including composites and technical textiles, and a wider use of cotton by-products throughout the value chain, to add value to the sector.
The Committee endorsed the recommendation received from the Private Sector Advisory Panel (PSAP) regarding the need to standardize phytosanitary certificates and recommended that the Secretariat work with members to raise awareness of this issue within the World Trade Organization.
The ICAC was informed that although contractual disputes had decreased in the last year, improvements were required in the enforcement of arbitration awards. All members of the Committee are signatories of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the New York Convention), but claimants were often unable to get their awards enforced, which was impacting the cotton trade and consumption.
The ICAC reaffirmed its support for a multilateral trading system under the aegis of the World Trade Organization, whose representative presented a summary of the current status of talks on the commodity ahead of the forthcoming 10th Ministerial Conference of the WTO to be held in Nairobi later this month.