China''s cotton purchases cause sharp price increase

The Cotlook A Index exploded in October 2003, rising by 13 cents to 80 cents per pound, the highest since September 1997. During the first three months of 2003/04, prices rose by 18 cents and averaged 66 cents per pound. The sharp increase in world cotton prices during October 2003 was caused by an abrupt reduction in the production estimate for China (Mainland), resulting in a large increase in projected net imports by China (Mainland) in 2003/04.

Cotton production in China (Mainland) is now estimated at 5 million tons, 400,000 tons less than projected at the start of October 2003. Adverse weather in China (Mainland) caused yields to decline to an estimated 1,000 kilograms of lint per hectare in 2003/04, or 15% less than in 2002/03. The reduced estimate of cotton production in China (Mainland) was mostly offset by increased estimates of production in Brazil, other countries in South America and West Africa. World cotton production in 2003/04 is still projected to reach 20.1 million tons, or 800,000 tons more than in 2002/03.

However, world cotton consumption in 2003/04 is being affected by rising cotton prices, and the estimate for 2003/04 was reduced by 400,000 tons during October 2003 to 20.8 million tons, unchanged from 2002/03. Mill use in China (Mainland) is expected to rise slower than projected earlier, and is now estimated at 6.5 million tons, compared with 6.3 million tons consumed in 2002/03. Mill use in China (Mainland) is projected to exceed production by 1.5 million tons, necessitating imports of 1.2 million tons. Net imports by China (Mainland) are projected to increase to 1.15 million tons in 2003/04, up from 520,000 tons in 2002/03. Increasing imports by China (Mainland) will lead to record world trade in 2003/04, projected to reach 6.7 million tons.