Cotton prices expected to drop further

By Don Hogsett -- Home Textiles Today, 1/28/2002 12:00:00 AM

WASHINGTON —

With world cotton production still outpacing consumption by almost 8 percent, international cotton prices are forecast to remain at depressed levels, dropping by more than 20 percent, to about 45 cents a pound this year from more than 57 cents in 2001.

"World production is expected to reach 21 million tons for the first time in 2001/02, about 1.7 million tons — or 8.5 percent — higher than last season," reported International Cotton Advisory Committee (ICAC), a worldwide consortium of cotton growers.

At the same time, the cotton growers said in their latest monthly forecast, world cotton consumption "is projected to slide by some 100,000 tons." That imbalance between supply and demand will leave an overhang — ending stocks — of about 10.2 million tons, the cotton cartel projected, "the highest since 1985/86."

The laws of supply and demand being rigid and unforgiving, cotton prices remain under unrelenting pressure, and the growers' Cotlook A Price Index has plunged by almost 47 percent, from 66 cents a pound at the end of 2000 to 35 cents a pound by October 2001, its lowest level in 29 years.

Prices recovered somewhat in November, rising to 43 cents a pound, but leveled off in December, the cotton producers reported, "as estimates of production in Mainland China increased while prospects for a prompt world economic recovery dimmed."

But those low cotton prices, a gift to textiles producers, won't last forever, according to the ICAC. With prices remaining well below the cost of production for most producers, world production is forecast to decline to 19.09 million tons in 2002/03, while consumption is projected to rebound by 300,000 tons, rising to 19.87 million tons, said the ICAC. That indicates a season average price of 54 cents a pound in 2002/03, $0.09 above the expected average for this season, but still about $0.18 lower than the average of $0.72 a pound since 1973/74.

WORLD COTTON SUPPLY AND PRICING FORECAST
(in millions of tons, except for cotton prices)