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Cotton prices unlikely to reach last two season's levels
02
Oct '14
Given the predicted 1.8 million tons of surplus cotton production and changes in China’s cotton policy, prices are unlikely to rise to the levels seen in the last two seasons, says a report of the International Cotton Advisory Committee (ICAC).

“With the fall in prices, world cotton consumption is forecast to rise nearly 4% to 24.4 million tons with more of the consumption occurring in the latter half of the season as the market becomes more certain about the size of the new crop and can better determine an appropriate price for cotton,” it informs.

While cotton’s absolute volume of consumption is likely to grow, it will probably not gain back much its market share as it takes time for the market to adjust. The price volatility observed in the 2010/11-2011/12 seasons is not forgotten, and other competing fibers’ market shares have been growing.

In 2014/15, 33.8 million hectares were planted with cotton, up 3% from last season due to higher international cotton prices in 2013/14 and world cotton production is forecast to grow 1% to 26.2 million tons.

With greater incentive to improve yield and quality due to the new policy, Xinjiang, the largest cotton-producing region in China and the province where the trial subsidy is being implemented, is expected to have a bigger harvest than last season, and China’s overall production is projected at 6.4 million tons in 2014/15.

India expanded cotton area by 5% as the delayed monsoon encouraged farmers to switch to cotton, and with yield closer to the 3-year average, production is likely to reach 6.6 million tons, making India the world’s largest cotton producer in 2014/15.

Harvested cotton area in the United States could reach 3.9 million hectares as plentiful rainfall reduces the abandonment rate this season and production is forecast at 3.7 million tons, up 30% from 2013/14. Although some flooding has occurred in Pakistan recently, impact to the cotton crop has been minimal, and production is projected at 2.1 million tons in 2014/15.

While China imported much of the surplus production in the last three seasons, this season it has announced that it will not provide additional quota in 2015, beyond the required 894,000 tons, as it has in recent seasons.

The restriction on imports next season it seems has been implemented to help reduce the large government-held cotton stocks, given that China’s consumption is expected to exceed production by around 1.5 million tons.

Though some mills still hold additional quota for 2014, China’s imports are forecast to fall 36% to 2 million tons, and world imports would decline 11% to 8 million tons and imports by the rest of the world, notably Southeast Asia, are projected to increase 2% to 6 million tons. (AR)

Fibre2fashion News Desk - India

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