The Hindu Business Line : Large supplies rein in cotton prices

DESPITE expectation of a sharp upswing in world cotton prices triggered by record import requirement of China, the market is yet to show signs of real price buoyancy even four months after the beginning of the new season 2005-06.

Cotlook A-Index has so far averaged 55 cents a pound versus the forecast average price of 65 cents a pound for 2005-06. In 2004-05, prices averaged 52 cents a pound.

Prices are still low, according to the Washington-based International Cotton Advisory Committee (ICAC) which asserted that over the last two decades, the most important single variable affecting season-average international cotton prices was net imports by China.

For 2005-06, imports into China are forecast at a record 3.2 million tonnes, more than double the last year's figure of 1.4 mt. The country's output is estimated at 5.8 mt (9 per cent down from last season) due to decreased plantings and yields.

For 2005-06, it has estimated production at 25 mt, 5 per cent less than last year; but still the second highest on record. Output in the US is virtually unchanged at 5 mt, while Pakistan's crop is estimated 11 per cent lower.

In the southern hemisphere where plantings have started, production could decline primarily because current prices are not exactly friendly to producers. One major origin to show a marked increase is India. Despite lower crop, world consumption in 2005-06 would trail production by a small margin. Record opening stocks (11 mt) mean comfortable supplies for the whole year.

China's cotton use is expected to rise 10 per cent to 9 mt.

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