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'Cotton carryover stocks may not decline in 2009-10' – Mr Butler, Cotlook

26 May '09
3 min read

The cotton sector has had a very tough time in the just completed cotton season. At just about the time harvesting for the new cotton crop had begun, the economic turmoil broke out, bringing down with it prices of all commodities including cotton to new lows.

Prices of cotton in the New York Futures markets had the misfortune of touching four year lows. This has made a lot of farmers across many major cotton producing countries like China jittery and acreage of cotton is expected to fall substantially.

To understand the actual condition of cotton market, in the previous few months and the current scenario, Fibre2fashion spoke to few proficient people from the cotton sector like Mr. Ray Butler, Chief editor of Cotton Outlook and Managing Director of Cotlook Limited, which provides market summaries, industry related and general news stories on the cotton industry.

We started by asking his views about cotton production in the next cotton season vis-à-vis the just completed season, to which he said, “Cotton Outlook's initial estimate of 2009/2010 production was released in February, since when it has increased slightly, thanks mainly to USDA's slightly higher projection of US plantings than suggested by the National Cotton Council's earlier survey of farmers' planting intentions”.

He continued by saying “Global cotton output is currently projected at close to 23.2 million tons, barely one percent less than estimated production during the 2008-2009 season”.

Further we tried to know the consumption pattern against production in the 2008-09 cotton season to which he explained by saying, “World cotton consumption fell during the 2007/2008 season for the first time in this century and the current 2008/2009 season has witnessed a substantial further decline, perhaps of the order of 11 percent, to around 22.5 million tons.

He also added that “According to Cotlook's data, therefore, world carryover stocks have risen during each of the past five seasons and, based on present estimates, seems unlikely to decline in 2009/2010”.

We then questioned him about the impact on availability of cotton next year as Chinese farmers are expected to reduce acreage in 2009-10 season, to which he said, “Some of the more pessimistic assessments of the 2009/2010 season's cut in China's cotton area have tended to disappear in recent weeks, owing to the firming of prices, brought about by the Chinese governments macro-control policies”.

He carried on “Observers seem increasingly inclined to the view that, given no abnormal setbacks, the new season's output will therefore be reduced only moderately compared with 2008/2009. Cotlook's current projection is a decline of 550,000-725,000 tons and China's import requirement will persist both next season and into the future but the magnitude and timing of imports remains largely in the hands of government, by dint of quota controls”.

In conclusion he said, “Cotton Outlook does not make price forecasts. The Cotlook A Index currently stands at 59.25 US cents per lb (CFR main Far Eastern ports), levels last seen at the end of January. The introduction of a forward Cotlook A Index for the 2009/2010 season is anticipated shortly”.

Fibre2fashion News Desk - India

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