The International Cotton Advisory Committee (ICAC) lowered its forecast for world cotton prices as a result of the predicted 1.8 million tons of surplus cotton production and changes to China’s policy for the fiber.
At the end of the 2013/14 season, international cotton prices were roughly $0.80 per pound, and prices have continued falling in the first two months of this season. Given the sizeable surplus and China’s cotton policy changes, prices are unlikely to reach levels seen in the last two seasons, ICAC noted in a statement released Wednesday.
Its forecast for cotton prices in the 2014/15 was lowered $0.05 to $0.75 cents per pound.
“With the fall in prices, world cotton consumption is forecast to rise nearly 4% to 24.4 million tons with more of the consumption occurring in the latter half of the season as the market becomes more certain about the size of the new crop and can better determine an appropriate price for cotton,” ICAC noted.
The ICAC said while cotton’s absolute volume of consumption is likely to grow, the fiber probably won’t regain much of its share as the market takes time to adjust.
World cotton production is forecast up 1 percent to 26.2 million tons, and China’s overall production is projected at 6.4 million tons in the 2014/15 season.
“While China imported much of the surplus production in the last three seasons, this season it has announced that it will not provide additional quota in 2015, beyond the required 894,000 tons, as it has in recent seasons,” ICAC noted. “The restriction on imports next season was likely implemented to help reduce the large government-held cotton stocks given that China’s consumption is expected to exceed production by around 1.5 million tons.”
India expanded its cotton area by 5 percent as the delayed monsoon saw farmers switching to cotton, and with a yield closer to the 3-year average, production is expected to reach 6.6 million tons, making India the world’s largest cotton producer in 2014/15.