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Cotton consumption likely to decline 1 mn bales in 2008/09
18
Oct '08
In 2006/07, world cotton consumption recorded its largest sustained growth rate in nearly 50 years. Between 2001/02 and 2006/07, world cotton consumption grew at an average compounded rate of 5.5 percent a year. Consumption had reached similar peaks in 1987/88 (5.3 percent) and 1967/68 (5.0 percent), but 2006/07 established a new record high. Since 2006/07, prospects for global income gains have slowed and world cotton consumption in 2008/09 is expected to fall about 1 percent from the year before, to 123 million bales.

While world consumption is expected to decline 1 million bales in 2008/09, an even larger drop is foreseen for production: a 7-million-bale decline to 114 million bales. World trade is expected to drop (2 million bales lower to 36 million), and world ending stocks are expected to shrink by 6 million bales, to 55 million. Stocks are declining mainly in the United States and China.

Historical Consumption Declines and World Income
A growing world population, past investments, and technical advances mean that the global economy continues to grow every year, even as shocks in particular countries lead to economic contraction. Similarly, world cotton consumption is twice as likely to grow in any given year as it is to decline. Large declines in world consumption—those rounding to at least a 2 percent drop—are relatively infrequent, occurring only 7 times since 1960/61.

World economic growth during the years with the seven largest global cotton consumption declines has averaged 3.2 percent.

However, this average is skewed by the high income growth rates that were typical for the post-WWII era through 1967. Averaging over the most recent five instances when world cotton consumption fell significantly, world income growth was 2.5 percent. In early October 2008, the International Monetary Fund (IMF) forecast calendar 2009 income growth at slightly more than 3 percent.

While the short-term economic prospects of the most developed countries have diminished in recent weeks, the majority of global end-use of products containing cotton occurs in developing countries, particularly Asia. Large foreign exchange reserves and reforms following the 1997 Asian Financial Crisis provide developing countries with resources well suited to responding to recent developments in the United States and Europe.

The ratio between cotton and polyester prices remains relatively favorable, with cotton prices climbing only 6 percent relative to polyester compared with a year-earlier, and cotton about 20 percent less expensive relative to polyester than it was during much of the 1990's. Therefore, continued income growth in developing countries is expected to hold changes in world cotton consumption to a relatively small decline.

Cotton Council International


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