Global : ICAC Expects Higher Global Cotton Production

According to the International Cotton Advisory Committee (ICAC) low cotton prices and increased consumption is expected to lead to higher global cotton production to 21.1 million tons, up 1.9 million tons from 2002/03, the second largest crop on record after 2001/02.

World cotton area is expected to rise by 11 per cent to 33.1 million hectares in 2003/04.

The historically low cotton prices in 2001 are leading to reduced production and increased consumption in 2002/03.

World ending stocks are declining by an estimated 1.7 million tons this season, ICAC, an association of 42 governments of cotton producing and consuming countries said.

As a result, the Cotlook A Index is projected to average 56 cents per pound this season, up 14 cents from the 29-year low in 2001-02.

Higher prices combined with weaker-than-expected economic growth are expected to boost world production and slow the growth rate of world consumption in 2003-04.

The Cotlook A Index tumbled below 59 cents per pound at the end of April 2003, rising from 35 cents in November 2001 to 61.5 cents per pound in March 2003, a two-year high, ICAC said.

Plantings in the northern hemisphere for 2003 started with international cotton prices at their highest level, at this period of the year, since 1998.

In addition to higher prices, structural factors continue to stimulate cotton production. With advances in technology, including genetic engineering, cotton production costs worldwide are coming down.

IMF projections released in April 2003 suggest that the world economy will grow by 3.2 per cent this year, substantially lower than the 3.7 per cent forecast last September.

The rate of growth in world cotton consumption is expected to abate from an estimated 3.5 per cent this season to 1 per cent in 2003/04.

World cotton consumption is projected to reach 21.1 million tons, up 200,000 tons from 2002-03, and equal to forecast production. The textile industry in China (Mainland) is fuelling the increase in world cotton mill use.

Net imports by China (Mainland) were expected to double next season from an estimated 300,000 tons in 2002-03.

Market fundamentals suggested the Cotlook A Index would average 61 cents per pound in 2003-04.