Cotton prices to rule firm: Experts' Say
Cotton market – the white gold market of our industry is known for price volatility. Industry experts and current market sentiments opine the Cotton Prices to remain high this year. Not to mention- it isn't just a guess work! Rather, a set of factors determining this behavior of one of industry's basics raw material market for the year through.
To locate these determinants, our News team at Fibre2fashion arranged for a few colloquies with dab hands in this field.
Mr Terry Townsend, Executive Director, International Cotton Advisory Committee (ICAC), revealing the internal and external factors to price rise, said –“Stocks of cotton held around the world fell from 12 million metric tons at the end of July 2009 to an estimated 9.5 million tons at the end of July 2010. In addition, the world economy improved much faster than had been expected in early 2009, and demand for cotton products rose by more than 4% to 24.5 million tons in 2009/10. Furthermore, the strong growth in consumption is continuing during 2010/11, and world cotton stocks will tighten further this season. The momentum from the stronger cotton fundamentals during 2009/10, combined with continued growth in cotton consumption in 2010/11, is leading to higher cotton prices. “
Mr Townsend also highlighted the resultant movements of rising cotton prices. He described that there would be increased production and slower growth in consumption. Farmers will be encouraged to harvest all the cotton that is grown in 2010/11, even the latest-opening bolls, resulting in a rise in cotton yields because of increased harvesting efficiency. He also envisages that during 2011/12, governments and cotton companies will devote additional resources to providing cotton farmers with inputs, resulting in increased area and production a year from now.
Meanwhile, textile mills will increase their efforts to substitute polyester for cotton. “Consequently, world cotton production is likely to exceed 26 million tons by 2011/12, while consumption will probably rise to less than that amount, and prices will eventually correct,” avers the ICAC Director.
Further, Mr Townsend also expressed his dissatisfaction on government intervention and trade policies introduced in recent past. He spoke-”Recent developments in trade policies in response to commodity shortages have been worrisome. Just in 2010, governments have interrupted trade in cotton, cotton yarn and grains, setting precedents for further interventions in commodity markets in the future.”
He feels that, self-evidently, those policies interrupting commodity exports or imports result in immediate losses among trade partners. Distortions to trade in cotton harm the interests of cotton producers in all countries as reliable suppliers of raw material to textile industries, thus encouraging increased use of polyester by textile mills. Disruptions to trade have the effect of increasing price volatility in commodity markets.