Lower demand from China this year, coupled with cotton prices which have fallen by around 30 percent since August 2013, spells tough times for Sodecoton.
Market news has not been good for African cotton companies, alongside Sodecton, which is the apex organisation for cotton trade in the African country of Cameroon, says Business in Cameroon.
Business in Cameroon quotes the Commodafrica which has analysed that China, which currently controls 60 percent of the world cotton market, has only a cumulative stock estimated at 11 million tonnes.
This, notes the President of the French Cotton Association or Association française du coton (Afcot) is less than half of what it was in 2014 and a third of what was in stock in 2012.
Combined with lower global prices, this decline in China’s imports will be a tough equation for African cotton companies to solve.
Cotton output at Sodecoton is expected to reach 240,000 tons this season, which is twice the volume of expected cotton exports to China in 2014/15.
This could mean lower cotton sales in the season, unless Sodecoton accepts a discounted price, which could also impact future operations at the cotton company.
This situation may also intensify smuggling of Cameroon cotton by local producers who actually receive seasonal credits from Sodecton to Nigeria; a practice that is already hurting Sodecoton.
“These various losses would leave the agro-industrial company vulnerable, making it difficult for it to honour its commitments to local banks which usually finance cotton seasons,” Business in Cameroon informs.
Commodafrica has said that the global market for cotton in 2014/15 will be harder for West-African countries, where cotton output is expected to rise by 16% to 1.8 million tons. (AR)
Fibre2fashion News Desk - India