In the first 4 months of 2007, weekly cotton prices, as measured by the Cotlook A Index, were remarkably stable and lacking any clear direction. This is in contrast to medium merino wool prices which have risen strongly in US$ terms.
A combination of the absence of any import quotas released from China and large US cotton stocks in the short term have likely been the reason for the lack of direction and stagnant prices. Counteracting these forces is an expected modest decline in cotton stocks and increase in demand in 2007/08.
The focus in the US on ethanol production is expected to have implications for US cotton plantings, with the planted area to cotton forecast to fall in the 2007/08 season.
However, this forecast shortfall in US cotton production is expected to be made up from other countries (such as India, Pakistan), while China's production is expected to remain high and the second largest on record.
Australian Wool Innovation Limited
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