The Hindu Business Line : Cotton prices to rule soft

WORLD average cotton prices that had climbed to 68.30 cents a pound in 2003-04 are expected to rule much lower in the current year following record world cotton production. The Cotlook A-Index is forecast to average 49 cents a pound in 2004-05.

Aided by favourable weather and higher planted area, global cotton output would reach 24.65 million tonnes, a big jump in 2004-05 from 20.65 mt of the previous year.

Advances in technology including better tools of pest management are helping to reduce input use, lower production costs and expand cotton production, the International Cotton Advisory Committee (ICAC) that held its plenary meeting here recently pointed out adding that the development of new technologies is causing cotton supply to expand faster than demand.

Consequently, prices are likely to be approximately 20 cents per pound lower during the next five seasons than the average of the last thirty years, the secretariat has estimated.

Stimulated by lower prices, stronger world economic growth and ongoing efforts to promote consumption, world cotton consumption is set to rise by 1.2 mt to reach a new high of 22.5 mt in 2004-05. World cotton trade, on the other hand is forecast to shrink to 6.7 mt (7.3 mt) primarily due to lower import projected for China.

Ending stocks that had fallen from the record 10.5 mt in 2002 to 7.7 in 2004 are expected to rise again to 9.9 mt by the end of the current year.

World cotton use and trade will benefit from the full elimination of quotas on textile and apparel trade among World Trade organization (WTO) members on January 1, 2005 and continue to benefit from consumer promotion programmes, ICAC secretariat said.

Following reaffirmation by a overwhelming majority of member governments that production and export subsidies distort cotton production and trade causing negative impact on cotton farmers, especially in the developing and least developed countries, the ICAC urged that these subsidies be removed.