Cotton prices are poised to hold long-term well above lows which lasted from late 2014 into 2016, with demand growth to outpace production increases despite "favourable returns" for growers, Abares said.

The official Australian commodities bureau stuck by a forecast of cotton prices, as measured by the Cotlook A index of physical values, averaging 78.0 cents a pound this season, on an August-to-July basis.

That is 1 cent higher than an upgraded estimate last week from the International Cotton Advisory Committee, although implies a fall ahead for the Cotlook A, which currently stand at 87.10 cents a pound.

Abares foresaw prices averaging 80.4 cents a pound in 2017-18, rising to 88.0 cents a pound for 2021-22.

'Favourable returns'

The forecasts factored in expectations of continued falls in world inventories, from a high of 24.3m tonnes reached two years ago, falling to 16.0m tonnes in 2021-22.

World cotton production is expected to rise by 1.8m tonnes to 24.7m tonnes next season, and to keep rising, at a rate of some 2% a year – supported by the appeal to farmers of the crop from its buoyant prices.

Abares forecast a "gradual increase in world cotton plantings in response to expected favourable returns to cotton production, compared with alternative crops".

The bureau forecast prices of corn, for instance, a major competitor in spring sowings programmes in many countries, showing slower growth, of less than 10%, over the next five years.

'GM saturation'

Improvements in cotton yields, by contrast, "will be constrained over this period because of the almost complete uptake of the current generation of genetically modified varieties".

However, India, the top cotton-producing country, will prove an exception, thanks to government-backed drives to support the likes of irrigation, pest control and mechanisation.

"Currently India has the lowest average lint yield among the major producing countries.

"Government training in the use of farm machinery in India will drive productivity gains through the reduction in labour-intensive operations such as hand-picking cotton."

'Expanding rapidly'

Meanwhile, global cotton consumption will, after a 7% jump next season, rise by 2.4% a year, spurred by "an expected rise in demand for clothing and textiles in Europe, the US, Japan and Australia".

This increasing demand is seen fuelling increased mill activity in particular in countries such as Bangladesh, Brazil, India, Indonesia and Turkey, outside the OECD group of nations.

"The textile and garment industries in these countries are expanding rapidly," Abares said, while flagging the prospect of "constrained" consumption in China, where a growing reliance on imported fibre will constrain industry competitiveness.

"China is facing strong competition in the international textile market from neighbouring, low-cost Asian countries such as India, Bangladesh, Vietnam, Indonesia and Cambodia."

Australian prospects

For Australia itself, Abares forecast sowings – which doubled to 557,400 hectares this season, thanks to good water availability – increasing further in 2017-18 to 570,000 hectares, driving production to 1.12m tonnes, the second biggest crop on record.

"Assuming average seasonal run-off between March and November, the level of water in irrigation dams should enable another large Australian cotton planting in 2017–18," the bureau said, seeing the ample water availability boosting yields too.

Exports - supported by the improved production, and "strong world demand for high quality Australian cotton" - were seen rising by 44% to 774,000 tonnes this season, and to 1.06m tonnes in 2017-18.