Cotton prices grow as production slows

Staff -- Home Textiles Today, 7/15/2002 12:00:00 AM

WASHINGTON —

With world cotton production slowing, and supply now forecast to fall behind demand, cotton prices staged a rally in June. They climbed to a season high of $0.45 a pound, up almost 30 percent, or $0.10 a pound, from a season low of $0.35 last November, according to a monthly update of the International Cotton advisory Council (ICAC).

But even while edging higher, prices are still about 32 percent, or $0.21 a pound lower than in December 2000, said the ICAC.

In good news for growers — but not so good news for U.S. textiles producers and retailers — cotton prices have probably reached their bottom and are starting to cycle higher, the ICAC reported. As demand continues to outpace supply both this year and next, and cotton growers rein in production and shrink the number of acres devoted to the crop, cotton growers will finally see some of the price relief they need to end a long drought in cotton prices and profits, said the world consortium of 43 cotton producing nations.

"The world cotton industry is suffering through one of the most painful periods for producers since the invention of the cotton gin 200 years ago," said the growers' trade group. "Average international prices this season will be the lowest since 1972/73," said the ICAC. And when adjusted for inflation, "the average cotton price this season is the lowest in history."

Supporting the rise in prices, said the ICAC, production in 2002/03 is expected to decline by 2.1 million tons, or 10 percent, to 19.2 million tons, with production running about 1.2 million tons behind consumption. World cotton growing area is estimated to shrink by about 5 percent, or 1.6 million hectares, to 31.9 million hectares.

With supply and demand coming into better balance, said ICAC, "prices are likely to continue recovering," rising to an estimated $0.52 a pound next year, $0.10 higher than the expected average for this season.

World cotton supply and pricing forecast
(in millions of tons, except for cotton prices)