World cotton prices have been ruling firm during the current season and are expected to remain even higher next year, said International Cotton Advisory Committee (ICAC), in its latest monthly update.
Despite higher prices in 2007-08, world cotton production is expected to decline to 25.48 million tonne in 2008-09 as against 26.24 million tonne due to decline in both area and yield. A major drop in production is forecast in the US with smaller declines in China, Brazil, Egypt, Turkey and Central Asia. Production increases are forecast for India, Australia, the African France Zone and Pakistan. As for consumption, ICAC stated that due to projected slower global economic expansion in 2008 and 2009 and higher prices of cotton relative to polyester, global cotton mill use is expected to decline by 1% to 26.61 million tonne in 2008-09 as compared to the estimated 26.76 million tonne this year.
ICAC stated that Cotlook?A Index increased sharply from 72.2 US Cents per pound on June 5 to 81.70 Cents on June 17. This is the second time the index crossed 80 cents, the first being in early march when it reached 90 cents, possibly due to increased speculation and rising prices of competing commodities. Prices of major competing commodities such as wheat, soybeans and corns are said have risen faster than cotton prices during 2007-08.
In addition, fertilizer prices are much higher and this may also impact on cotton which needs high fertilizer doses. All these factors may lead to a 1% drop in cotton area to 33 million hectares next year compared to 33.4 million hectares this year.
The world average yield is also forecast down by 2% to 772 kg per hectare next year from 785 kg expected this year.