The Hindu Business Line : Tightening quality supplies firm up cotton prices

TIGHTENING supplies caused by a combination of decline in output and rise in consumption are leading to firming cotton prices this season. A large increase in China's import requirement is seen giving an upward thrust to the market.

World cotton production in 2002-03 is expected to fall 10 per cent or 2.2 million tonnes (mt) from a record 21.5 mt output last season.

World cotton supply (beginning stock plus production) is set to decline 4 per cent or 1.2 mt.

World cotton consumption is expected to increase by 2.5 per cent or 500,000 tonnes to reach a record 20.7 mt in 2002-03. The driving force behind the increase in world consumption remains China where cotton consumption is projected up 200,000 tonnes in 2002-03 to 5.7 mt. Significant increase are also expected in Pakistan and Turkey.

According to International Cotton Advisory Committee (ICAC), rains at the time of harvest in the US and other countries affected the quality of crop.

While supply of coarse count cotton is expected to remain unchanged, supply of fine cotton is forecast to decline by 9 per cent.

High-medium and medium cottons is expected to decline by 4 per cent and 7 per cent respectively. The outlook for shrinking stocks combined with the anticipation of larger net imports by China is leading to an increase in international prices. Market fundamentals suggest that the average Cotlook-A Index will rise to 54 cents per pound in 2002-03, 12 cents or 29 per cent higher than last season, which was the lowest in three decades, ICAC said.

Prices will however remain well below the long-term average of 71 cents per pound for the fifth consecutive season. While the outlook in the medium and finer categories will provide some support to the Cotlook-A Index, prices of extra-fine cotton my decrease because of anticipated higher supplies.

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