Citing higher cotton supply scenario for the season 2016-17, the International Cotton Advisory Committee (ICAC) has hinted towards a bearish trend in the prices for the fibre in the second half of the year.

The ICAC Secretariat has forecast the season-average for Cotlook A Index in 2016-17 (starting October-September) will range between 66 and 83 cents per lb, with a midpoint of 74 cents/lb, which would be 4 cts/lb higher than last season.

But the world cotton production in 2016-17 is likely to rise by 8 per cent to 22.8 million tonnes (mt) and the world consumption is likely to remain stable at 24.1 mt , which may put pressure on the prices in the latter half of the season, the ICAC noted.

World ending stocks may fall by 7 per cent to 18 mt in 2016-17, though stocks outside of China are expected to grow by 6 per cent to 8.7 mt .

According to ICAC, the current season began with lower stocks, particularly from countries in the Southern Hemisphere, which saw ending stocks in 2015-16 fall by 21 per cent to 1.6 mt , the lowest since 2009-10.

The shortage in supply carried through the first few months of 2016-17 season thereby keeping the prices firm.

Indian picture

In Gujarat — one of the key producers of the commodity in India — prices for raw cotton hovered in the range of ₹5,500-5,670 a quintal inching towards new record.

Traders cited the reduced arrivals and cash shortage in the banks as the reason for the rally in the cotton prices, whereas most believed that the rally may not continue longer on good production.

ICAC predicts India’s cotton production to increase by 4 per cent to just under 6 mt , making it the world’s largest producer.

The competing fibre, polyester, has shown uptrend but still well-below international cotton prices, making it unlikely that cotton mill use will expand unless polyester prices continue to rise.

Mill use in India is projected to decline by 1 per cent to 5.2 mt .

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