The Hindu Business Line : World cotton output may remain unchanged

IN 2006-07, world cotton production may remain largely unchanged from the current year despite an anticipated 3 per cent expansion in area to 35.7 million hectares, assuming average yields; while season average prices may be marginally lower because of possible reduced imports by China.

Record opening stocks for the next year are also likely to exert pressure on prices.

Higher prices this season (average 65 cents a pound, up 13 cents from 2004-05) are likely to encourage area expansion in China and India, whereas harvested area in the US is forecast down while remaining stable in Pakistan, according to International Cotton Advisory Committee (ICAC).

World cotton production in 2006-07 may reach 25.3 million tonnes (mt) about the same as in the current year, but less than the 2004-05 record of 26.3 mt.

The current season's relatively strong market has been triggered by an estimated large increase in China's imports (3.4 mt) following reduced indigenous cotton output and increase in consumption.

World cotton consumption is expected to increase by 4 per cent in 2005-06, to 24.3 mt.

China is expected to capture most of the growth in mill use this season, the ICAC pointed out.

Cotton arrivals in India are gathering momentum. October-December arrivals are estimated at 85-90 lakh bales. In January, market arrivals could be as much as 60 lakh bales.

Prices in the domestic market would come under downward pressure once the stocks begin to build.

In Gujarat, the market has firmed up in the last three days. It is possible that some traders have been caught short. Export commitments so far are an estimated 18-lakh bales.

Some players believe the latest price spike is temporary and that demand-supply fundamentals would soon catch up.