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'Chinese cotton prices to rule above PSF rates' - ICAC
Sep '13
Although the Cotlook A Index and the price of polyester in China were essentially equal during most of the 2000s, these price indices diverged in 2009/10, and it appears that 2013/14 will be the fifth consecutive season in which cotton prices will be substantially above polyester prices in China.

During August 2013, the Cotlook A Index averaged approximately 93 cents per pound, while polyester in China averaged approximately 76 cents per pound. This is a substantial difference in a high volume, low-margin business like yarn spinning and thus, cotton is expected to continue to lose market share this season.

Despite the loss of market share, world cotton consumption is rising in absolute terms and is estimated at 23.7 million tons in 2013/14. Falling mill use of cotton in China due to its cotton procurement policy is encouraging a significant shift in mill use to other countries.

World cotton production, forecast at 25.6 million tons in 2013/14 would be down 3.5% from last season. The United States will likely account for most of the decline in world production, with U.S. production falling 900,000 tons, or 25%. Production in China and Uzbekistan are projected to remain unchanged in 2013/14.

World trade in cotton is forecast to decline by approximately a million tons to less than 9 million. This decline is almost entirely accounted for by reduced imports into China. Shipments from all major exporters are expected to fall, except from the CFA zone where producers are increasing production in 2013/14, and thus exports, in response to higher cotton prices.

The forecast for the season average Cotlook A Index in 2013/14 ranges from 85 to 126 cents per pound, with a midpoint of 103 cents per pound while world ending stocks are forecast to climb to 19 million tons by July 2014.

Estimates of mill use in India and Pakistan during 2011/12, 2012/13, and 2013/14 have been lowered, resulting in higher estimates of world ending stocks and a reduction in the forecast of the Cotlook A Index.

International Cotton Advisory Committee (ICAC)

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