The Hindu Business Line : World cotton prices may fall next year

HIGH cotton prices are expected to stimulate world production in 2004-05 to a new high, but restrain consumption. Currently world cotton prices are at their highest level since 1997.

Boosted by tightening world supply and record imports by China, the Cotlook A-Index is projected to average 75 cents (Rs 33.75) per pound in 2003-04, up 19 cents (34 per cent) from the previous season. However, next year prices are likely to decline 11 cents to 64 cents a pound because consumption is expected to trail production, the International Cotton Advisory Committee (ICAC) said.

With the planting season starting with high price, world production is expected to climb to a new high of 22.2 million tonnes in 2004-05, up 10 per cent or 2 mt from the current year.

Specifically, cotton output in China is expected to rebound next season to a record 6.3 mt (4.9 mt), while US production is forecast down 2 per cent to 3.9 mt partly due to competition from soyabeans, according to ICAC.

World cotton mill use is expected to stagnate in 2003-04 and to increase by less than 1 per cent in 2004-05 to an estimated 21.3 mt. This is because cotton is not price-competitive with chemical fibres despite the recent increase in crude oil prices.

Fuelled by China's imports, world cotton exports are projected to increase by 7 per cent this year surpassing the 7 mt mark. US cotton exports are projected at 3 mt representing 42 per cent of global exports. It is the highest for the US since 1960-61.