From the Secretariat ICAC Press Release, May 3, 2010
World Cotton Prices Surge in April
The Cotlook A Index rose almost continuously from 64 cents per pound in August 2009 to 84-87 cents per pound in March and early April 2010. This significant increase was driven mainly by a rising gap between declining production and recovering consumption. Global cotton mill use rebounded faster and stronger than expected after a sharp drop in 2008/09 caused by the global financial and economic crisis, while global cotton production declined for the third consecutive season. As a result, global cotton stocks are expected to drop by 18% to 10.4 million tons by the end of July 2010, the smallest level in six years.
The Cotlook A Index jumped to over 90 cents per pound in the last part of April, after the Indian government announced the suspension of cotton export registrations and requested that cotton exports already registered, but not yet shipped, be revalidated, with a monthly cap on revalidations to be determined. India is the second largest cotton exporter. It shipped over 1.2 million tons between August 2009 and March 2010.
World cotton production is forecast up by 13% in 2010/11 to 24.8 million tons, driven by high cotton prices. World cotton mill use is expected to continue to recover in 2010/11, growing by 2% to 24.8 million tons, pushed by continued improvement in global economic growth but limited by high cotton prices. World cotton trade is expected to continue to increase to 7.7 million tons. Global cotton ending stocks are expected to remain stable in 2010/11.
Based on a price forecast of 77 cents per pound for 2009/10, the ICAC Price Model forecasts a 2010/11 season-average Cotlook A Index of 85 cents per pound. The 95% confidence interval extends from 71 to 100 cents per pound. This forecast implies a 10% increase with respect to the 2009/10 forecast. However, caution must be exercised since all commodity markets are subject to great uncertainty.
WORLD COTTON SUPPLY AND DISTRIBUTION
2008/09 2009/10 2010/11 2008/09 2009/10 2010/11
Million Tons Million Bales
Production 23.41 22.1 24.8 107.5 101 114
Consumption 23.41 24.4 24.8 107.5 112 114
Exports 6.54 7.5 7.7 30.1 34 36
Ending Stocks 12.73 10.4 10.5 58.5 48 48
Cotlook A Index* 61.20 77** 85*** 61.20 77** 85***
* Season-average Cotlook A Index (U.S. cents per pound).
** The price projection for 2009/10 is based on the ending stocks/consumption ratio in the world-less-China in 2007/08 (estimate), in 2008/09 (estimate) and in 2009/10 (projection), on the ratio of Chinese net imports to world imports in 2008/09 (estimate) and 2009/10 (projection), and on the average price for the first nine months of 2009/10. 95% confidence interval: 74 to 80 cents per pound.
*** The price projection for 2010/11 is based on the ending stocks/consumption ratio in the world-less-China in 2008/09 (estimate), in 2009/10 (estimate) and in 2010/11 (projection), and on the ratio of Chinese net imports to world imports in 2009/10 (estimate) and 2010/11 (projection). 95% confidence interval: 71 to 100 cents per pound.
