By Luzi Ann Javier
March 5 (Bloomberg) -- A 400,000 metric-ton global cotton deficit forecast for the marketing year beginning Aug. 1 may be erased as output increases and weather conditions improve in India and Pakistan, Cotlook Ltd. said.
“There’s a good chance that may disappear,” Ray Butler, managing director of Cotlook, an industry information provider, said in an interview in Singapore today. “You could get more production in Pakistan and India.”
Cotlook’s 400,000-ton deficit estimate assumes output in the U.S., the world’s biggest exporter, will expand to 16.5 million bales, and production in India will grow to 32.5 million bales, from an estimated 29 million this year, Butler said. The U.S. Department of Agriculture estimated the U.S. crop at 12.4 million tons this year. A bale weighs 480 pounds (218 kilograms).
A balanced supply and demand situation may help cool prices that have almost doubled in the past 12 months, climbing to a two-year high of 84.6 cents a pound in New York on March 1.
The December-delivery contract “needs to rise” to 75 cents to 80 cents a pound by May to encourage farmers to expand planting, Joe Nicosia, chief executive officer at Allenberg Cotton Co., said at a conference in Singapore yesterday. The contract was unchanged at 74.69 cents a pound on ICE Futures U.S. at 12:54 p.m. Singapore time.
Cotton for May delivery, the most-active contract, gained 0.2 percent to 82 cents a pound at the same time.
Lingering Uncertainty
Global demand is forecast to rise to 24.8 million metric tons in the year starting Aug. 1, compared with the 24.5 million tons estimated last month and 24.1 million tons in the current marketing year, the International Cotton Advisory Committee, a group of governments of countries producing, consuming and trading the fiber, said in a March 1 report.
Still, the global supply situation in the next season will remain uncertain until U.S. farmers have planted their crops in May, the southwest monsoon brings rains to India in the middle of the year and harvests have been collected in October and November, Cotlook’s Butler said.
Cotlook is a Birkenhead, U.K.-based firm that provides information, analysis and pricing information on cotton.
“The view of how much cotton is going to be produced could change dramatically,” Butler said. “If the monsoon doesn’t come, we might see that figure reduced,” he said, referring to his forecast for India’s cotton output. “If the monsoon is normal, it might be more than 32.5 million bales.”
Exploding Prices
Cotton prices “will explode” if China and India have production problems next season, Allenberg’s Nicosia said yesterday.
China is the world’s largest producer, consumer and importer of cotton, according to the USDA. The North Asian nation is forecast to buy 1.96 million tons this year, up from 1.52 million tons a year earlier, the department said.
Exporters in India, the world’s second-largest grower, consumer and exporter, plan to more than quadruple shipments in the October-February period from a year earlier to benefit from rising prices, the country’s textiles ministry said on March 3.
Shippers registered to export 5.92 million bales of cotton during the period, compared with 1.32 million bales a year earlier, the ministry said on its Web site.
The Cotlook A Index of prices in Asian ports rose 1.1 percent to 87 cents a pound yesterday. The index reflects the average of the five cheapest prices offered at Far East ports.
The index may average 74 cents a pound this season, 21 percent higher than the previous year and up from a February estimate of 72 cents, the International Cotton Advisory Committee said in its report.