‘Cotton prices to remain subdued’

Our Commodities Bureau

Coimbatore, Dec 9: The surging carryover cotton stock in the US, coupled with programmes encouraging production would keep cotton prices subdued next season too, claims the International Cotton Advisory Committee (ICAC).

According to the committee, the US stocks are expected to surpass 20 per cent of world ending stocks at the end of next season. This, combined with programmes encouraging production, will keep a lid on prices. Supply and demand estimates suggest that the 2002-03 season-average Cotlook A Index will be 49 cents per pound against the current season’s average of 46 cents per pound.

‘‘In spite of the historically low cotton prices, an explosion in prices appears unlikely since rising demand will be met by supply. Consumer confidence and consumer spending in the US will be crucial as it is the largest consumer of cotton-made products at the retail level,’’ the ICAC has stated. The American government’s farm support programmes, which encourage production in times of lower prices too, have come under criticism from all quarters, including European Union members. Though EU is phasing out such price distorting schemes, the domestic support in the US has increased in the last 10 years.

After collapsing from last year end’s 66 cents per pound to 35 cents per pound by the end of October (the lowest since November 3, 1972), international cotton prices rose 22 per cent in November climbing to around 43 cents per pound. World cotton production is projected to decline by 1.20 million tonnes in 2002-03 to 19.60 million tonnes, down six per cent from the season, mainly due to the unremunerative prices. Cotton consumption is projected to increase by 1.50 per cent next year due to better global economic performance, claims ICAC.

World cotton production is estimated at record level of 20.90 million tonnes in 2001-02, about 1.60 million tonnes (8 per cent) higher than last season. Increases in production are expected in five out of the six largest Northern Hemisphere producers, China (Mainland), US, India, Uzbekistan and Turkey. While it will decline in Pakistan, claims ICAC.