Cotton prices continue to climb

By Don Hogsett -- Home Textiles Today, 9/16/2002 12:00:00 AM

WASHINGTON —

As the world supply of cotton falls from an all-time high recorded last year, and demand continues to grow, cotton prices are climbing sharply higher, and are forecast to jump by almost 27 percent this year, to about $0.53 a pound, up from almost $0.42 a year ago.

Despite the big run-up in price expected this cotton year — the cotton crop year runs from September through August — prices will still remain well below their long-term average price of $0.72 a pound, according to a monthly forecast provided by the International Cotton advisory Committee (ICAC), a world consortium of 42 cotton-producing nations.

In keeping with the law of supply and demand, the combination of higher consumption and lower worldwide production will bring relief to struggling cotton growers in the form of higher prices but put pressure on the already throttled margins of textiles producers in the United States.

The cotton growers are forecasting that the world cotton supply will decline by 4 percent this cotton year, or 1.1 million tons, to 29.7 million tons from an all-time high of 30.8 million tons during the previous season. At the same time, demand is forecast to increase by 3 percent, or about 600,000 tons.

Given that widening spread, international cotton prices have shot up by 41 percent in just the past 10 months, from a 29-year low of $0.35 a pound in early November 2001, to $0.495 a pound at the September start of the 2002/03 cotton year, the cotton cartel reported.

Even though climbing sharply higher, "International cotton prices are projected to remain well below the long-term average for the fifth consecutive season in 2002/03," the cotton consortium reported. "Supply and demand estimates suggest that the Cotlook A Index will average $0.53 per pound this season, $0.11, or 27 percent, higher than last season, which was the lowest since 1971/72. Due to a further reduction in ending stocks in 2003/04, combined with an anticipated increase in China's net imports, the Cotlook A Index is projected to reach $0.57 per pound in 2003/04."

World Cotton Supply and Pricing Forecast
(in millions of tons, except for cotton prices)