The Hindu Business Line : Global cotton production may trail consumption

IN 2005-06, world cotton consumption is projected to increase by 3.7 per cent to a new high of 24.4 million tonnes (23.5 mt), while production is expected to decline 8.4 per cent to 23.9 mt (26.1 mt).

With the year's production set to trail consumption, the market is likely to remain firm.

All major origins including China, the US, India and Pakistan are likely to face production declines, while consumption in all these countries is expected to continue to grow, except in the US, according to the latest report of the US Department of Agriculture (USDA).

World cotton exports too expected to reach a new high of 8.3 mt in 2005-06, up from 7.5 mt. China's cotton import requirement for the year is likely to grow at 120 per cent to 3.0 mt (1.4 mt in 2004-05).

Large domestic production (despite a projected 8 per cent decline from the previous year's record crop), rising global consumption demand and firm prices are likely to combine to create a window opportunity for Indian cotton exports. Already some trading houses have begun to scout for export orders, particularly from China.

At the global level, growth in cotton consumption has been the feature of recent years. At the end of 2005-06, annual growth in world cotton consumption is expected to have averaged 3.9 per cent over 5 years, a rate not achieved since the mid-1980s, USDA pointed out.

While all fibres have benefited from global demand growth, cotton has begun to benefit from an easing in the use of chemical fibre.

The report observed that the variability of demand for cotton and other fibres contrasts with steady strong growth in demand for vegetable oils (4-5 per cent year after year for decades) and meat consumption (2-3 per cent annually since 1975), while grain consumption has been volatile and has grown more slowly than cotton.

In addition to income growth, cotton consumption is also influenced by changes in consumer taste and industrial investment in chemical fibre capacity. World income growth has been relatively strong in recent years, and relative prices between polyester and cotton have been favourable to the latter.

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