By Wendy Pugh
March 2 (Bloomberg) -- Surging cotton prices may increase northern hemisphere crop planting, likely erasing a supply gap next season, according to a statistician at the International Cotton Advisory Committee.
“It is very likely that production will grow from this point,” Armelle Gruere said in an interview in Canberra. The increase could narrow or erase a deficit currently forecast at 400,000 metric tons for the year starting Aug. 1, she said.
Cotton prices in New York reached a two-year high yesterday as farmers in countries including the U.S. and China start to plant crops. The Washington-based committee yesterday forecast global output will rise 9.9 percent next season to 24.4 million tons, narrowing this year’s estimated 1.9 million ton deficit even as the group raised its estimate for consumption.
“Everyone thinks the crop will get bigger and it might be that there is no gap,” said Gruere at the Australian Bureau of Agricultural and Resource Economics Outlook conference. “For now we can’t say more because we don’t have all the information. They are just starting to plant in the northern hemisphere.”
Cotton for May delivery rose 1 percent to 83.29 cents a pound on ICE Futures U.S. in New York yesterday after touching 84.6 cents, the highest price for a most-active contract since March 6, 2008. Prices have jumped 25 percent since Feb. 5 and more than doubled in the past year as demand revived and adverse weather reduced output in the U.S.
The Cotlook A Index of prices in Asian ports may average 74 cents a pound this season, 21 percent higher than the previous year and up from a February estimate of 72 cents, according to the committee’s report yesterday. The index, which reflects the average of the five cheapest prices offered at Far East ports, added 1.2 percent yesterday to 86.55 cents.
Price Outlook
“Cotton prices will remain firm, but I don’t think they will be much higher than they are this season,” Gruere said. “My feeling is that the price may be above 70 cents but not a lot above 70 cents.”
The committee, which represents producing and consuming countries, forecasts that China’s imports may increase to 2.2 million tons next season from 1.95 million tons as an increase in production fails to meet rising demand.
Cotton planting in the country, the largest consumer, was conservatively estimated to increase 5 percent after difficult conditions in the past season, Gruere said. Production plunged 15 percent last year from 2008 to 6.4 million tons, the National Statistics Bureau said Feb. 25 in a statement on its Web site.
U.S. Crop
Output in the U.S., the top exporter, may rise 29 percent to 16 million bales in the year starting Aug. 1, the U.S. Department of Agriculture said last month. Output of 12.4 million bales from the recent crop was the lowest since farmers collected 12.2 million bales in 1989, according to the USDA.
Cotton prices will rise over the next three years, reaching 94 cents a pound in New York, according to Morgan Stanley.
“We see inventories continuing to dwindle as cotton demand recovers on improved global GDP,” Hussein Allidina, a Morgan Stanley analyst, said yesterday in an e-mailed report.
The 43 member countries in the ICAC account for 58 percent of world cotton production and 42 percent of fiber consumption. The organization estimates about 300 million people in the world are involved in producing and processing cotton.