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Cotton prices surge in April

04
May '10
The Cotlook A Index rose almost continuously from 64 cents per pound in August 2009 to 84-87 cents per pound in March and early April 2010. This significant increase was driven mainly by a rising gap between declining production and recovering consumption. Global cotton mill use rebounded faster and stronger than expected after a sharp drop in 2008/09 caused by the global financial and economic crisis, while global cotton production declined for the third consecutive season. As a result, global cotton stocks are expected to drop by 18% to 10.4 million tons by the end of July 2010, the smallest level in six years.

The Cotlook A Index jumped to over 90 cents per pound in the last part of April, after the Indian government announced the suspension of cotton export registrations and requested that cotton exports already registered, but not yet shipped, be revalidated, with a monthly cap on revalidations to be determined. India is the second largest cotton exporter. It shipped over 1.2 million tons between August 2009 and March 2010.

World cotton production is forecast up by 13% in 2010/11 to 24.8 million tons, driven by high cotton prices. World cotton mill use is expected to continue to recover in 2010/11, growing by 2% to 24.8 million tons, pushed by continued improvement in global economic growth but limited by high cotton prices. World cotton trade is expected to continue to increase to 7.7 million tons. Global cotton ending stocks are expected to remain stable in 2010/11.

Based on a price forecast of 77 cents per pound for 2009/10, the ICAC Price Model forecasts a 2010/11 season-average Cotlook A Index of 85 cents per pound. The 95% confidence interval extends from 71 to 100 cents per pound. This forecast implies a 10% increase with respect to the 2009/10 forecast. However, caution must be exercised since all commodity markets are subject to great uncertainty.

International Cotton Advisory Committee (ICAC)


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