The Hindu Business Line : China drives world cotton trade

With world cotton production projected to exceed world consumption, albeit marginally in 2005-06 and next year, worldwide inventory would inevitably be drawn down; yet, overall, supplies are expected to be comfortable but prices relatively firm. World trade is projected to remain at record levels during 2006-07.

In its latest report, the Washington-based International Cotton Advisory Committee (ICAC) has projected Cotlook A-Index (a measure of international cotton market prices) to show a healthy rise to average 67 cents a pound in the new season beginning August 2006.

Average price for the current year is 56 cents.

World cotton trade in 2005-06 is forecast to reach a new high of 9.4 million tonnes (ml.t.), up from 7.8 ml.t. in the previous year. The record level of trade is expected to continue next year too. With voracious appetite for cotton, China is the driver of the global cotton market.

The world's largest cotton producer and consumer is also the largest importer. It is a measure of the Asian giant's consumption needs that cotton imports in 2005-06 are estimated to rise three times to an unprecedented 4.1 ml.t., up from 1.4 ml.t. last year. In other words, China's imports account for about 44 per cent of world cotton trade.

In the northern hemisphere, cotton plantings are currently taking place. Area is projected to rise by half a million hectares to 31.5 million hectares in 2006-07, representing an increase of 1.8 million hectares over a 10-year average. Asian origins - China, India and Pakistan - are expected to expand cotton output, while a decline is forecast for the US.

In India, despite record production and stocks, prices have remained steady to firm. According to Mr Shirish Shah of Bhaidas Cursondas and Co, quality cotton is in short supply and cotton with low micronnaire is available in large quantity.

Mill consumption is said to be showing only a small increase as compared with last year. Domestic consumption would total 201 lakh bales this year, while exports are likely to touch 35 lakh bales, according to him.

The Cotton Corporation of India has estimated cotton output at 240 lakh bales and arrivals as of April 20 at 214 lakh bales.

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