The Hindu Business Line : World cotton prices rising

OVER the last one year, prices in the global cotton market have improved much to the relief of major producers and exporters. Indeed, prices recovered by a whopping 53 per cent in last 12 months.

After collapsing from 66 cents to a pound in December 2000 to a 19-year low of 35 cents per pound in October 2001, the Cotlook-A Index rebounded to 53.5 cents per pound in November 2002, the highest since March 2001. Nevertheless, prices remain below the long-term average of 71 cents per pound since 1973-74.

The situation is expected to ease further in favour of producers. Supply and demand estimates suggest that the average-season Cotlook-A Index will be 52 cents per pound this season and 54 cents next season, according to International Cotton Advisory Committee (ICAC) which has estimated world cotton production at 19.3 million tonnes for 2002-03, about 2.2 mt or 10 per cent lower than last season's record.

Declines are expected in 14 out of the 15 largest producing countries, Brazil being the only exception. World consumption is projected to rise by some 400,000 tonnes to 20.5 mt in 2002-03, the highest ever. World ending stocks are projected to shrink by 1.3 mt to 9.1 mt this season.

While in the US, domestic mill consumption, after a brief rebound, resumed its decline in August 2002, the textile industry in China continues to grow rapidly.

The US export commitment to China has currently exceeded 100,000 tonnes, five times more than in mid-November 2001.

Although rains have seriously affected the quality of US crop, it is a paradox of the US price mechanism that the scarcity of higher quality US cotton will help move the abundant supply of lower quality cotton.

Given the drop in Australian production and the anticipated delays in shipments from parts of Africa, a very tight supply situation in the high medium category, suitable for combed ring spun yarn, is on the horizon for the middle of 2003, ICAC said.

A rise in cotton prices is seen eroding the profitability of spinning industry.

A sustained price rally will largely depend on whether economic growth improves in developed countries.

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