The Hindu Business Line : ICAC sees lower than estimated crop

World cotton output in 2005-06 would now be even lower than earlier estimated following deterioration of cotton crop prospects in the southern hemisphere - mainly Argentina and Brazil as also Australia.

In other words, for consumers and major importers, there would be no respite from high prices.

Estimate of global cotton production has now been revised down to 24.9 million tonnes (last month 25.2 mt), lower than the record 26.3 mt of 2005-06 by the Washington-based International Cotton Advisory Committee (ICAC) which said southern hemisphere output would be down by 13 per cent from last year to 2.3 mt.

Record carryover

Despite consumption rising by 3 per cent from last year to 24.4 mt, the world will carry over a record 11.3 mt of cotton into next year.

However, world cotton exports are seen reaching a new high of 8.9 mt this season (7.8 mt last year), thanks to China whose significantly large import requirement has lent buoyancy to prices. The world market is unlikely to ease anytime soon.

The situation in India is, however, different.

Production has been in excess of domestic consumption requirement for the second season in a row.

Large stocks have accumulated at various levels.

Stocks with mills

Mills are reportedly holding over 100 lakh bales, sufficient to meet their needs of next 4-5 months. This rapidly emerging inventory overhang is pressuring domestic prices down, notwithstanding prospects for export of about 25 lakh bales. Looking to the pace of arrivals (estimated at about 180 lakh bales so far), there is belief that the crop size could be higher at about 250 lakh bales.

For 2006-07, ICAC expects world cotton output to rise to 25.5 mt and consumption to expand to 25.1 mt Cotlook A-Index average prices are likely to harden further to 65 cents a pound (from current average of 59 cents a pound) next year, as per ICAC forecast.