Forecasts continue to suggest international cotton prices will stay low in the 2012-13 season, thanks to a rise in global cotton stocks as production exceeds consumption.
The projection last week by inter-governmental group the International Cotton Advisory Board (ICAC) came as plantings get underway in the northern hemisphere.
But the committee admits there continues to be uncertainty over how China will use its growing stockpile.
Because competing crops are more attractive to farmers as cotton prices are well below last year, the world area planted with cotton is expected to fall by 4% to 34.m hectares - breaking the increasing trend of the last two seasons.
Based on average yields, production could decline by 5% to 25.7m tons in the 2012/13 season, which ends on 31 July, ICAC said.
On the other hand, after two seasons of decline, global cotton mill use is projected to increase by 4% to 24.3m tons in 2012/13, driven by improving economic growth and lower cotton prices.
Of course, any setback in the global economy could affect this projection.
After a rebound of 40% to a record of 13m tons in 2011/12, global cotton stocks could expand by 11% to 14.5m tons in 2012/13, according to ICAC projections.
This is equivalent to 60% of global mill use, the largest stocks-to-use ratio since the late 1990s, it said. This accumulation of cotton will weigh on international cotton prices in 2012/13.
The rebuilding of the Chinese national reserve means that by the end of 2011/12, it might hold as much as a quarter of global stocks. China's inventories may "continue growing in 2012-13, albeit at a much slower rate", the committee said.
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