2nd December 2010,
The squeeze in world cotton supplies, which has driven prices of the fibre to an all-time peak, will relax markedly next season as production hits a record high and consumers switch to cheaper artificial fibres.
The International Cotton Advisory Committee, publishing its first forecasts for 2011-12, pegged cotton inventories ending the season at 11.2m tonnes (52m bales), their highest for three years.
While failing to give detailed reasoning behind its forecasts, the intergovernmental group predicted a rebound in world production to 27.3m tonnes, surpassing by more than 600,000 tonnes the record set four years ago.
Consumption, however, will grow by just 1.2%, as high prices feed a trend which "has already resulted in some shifts in fibre blends at the spinning level, to the benefit of polyester", the committee said.
"The share of cotton in global fibre use, estimated at 36.5% in 2009, will likely continue to decline in 2010 and 2011."
Squeeze to relax?
The estimates imply a stocks-to-use ratio – an important gauge of a commodity's supply, and therefore of the price it can command – of 44% in 2011-12, higher figure than the current season's 38%, and approaching the 10-year average of 48%.
The last time the ratio was at 44%, six years ago, the benchmark Cotlook A price index averaged 52.2 cents a pound, less than half its levels so far in 2010-11.
However, the committee stopped short of making a price forecast for 2011-12, and indeed restated doubts over its estimate of 95 cents a pound for the current season, given futures which in both New York and Zhengzhou in China have begun a habit of moving the maximum allowed by exchange limits.
"The ICAC Secretariat acknowledges that in the current environment of volatility, the ICAC price model may be less relevant than in other seasons," the committee said.
'Limited supplies'
For 2010-11, the committee lowered its estimate of world cotton consumption by 400,000 tonnes, flagging "limited available supplies and high prices".
Indeed, the output forecast was lowered too, by 300,000 tonnes to 25.0m tonnes, reflecting setbacks to some northern hemisphere crops, with southern hemisphere producers set for "bumper" harvests.
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