Cotton trade to shrink in 2004-05

International cotton trade is expected to shrink in the year 2004-05 as current high prices are expected to restrain consumption.

The International Cotton Advisory Committee (ICAC), an association of 42 cotton producing and consuming countries, said planting for 2004-05 was starting with international prices at their highest level, at this period of the year, since 1997. Higher prices will stimulate production but restrain consumption.

ICAC felt tightening world supply and record imports by China would take the Cotlook A Index to 75 cents per pound in 2003-04, up 19 cents (34 per cent) from the previous season. World production would be a record 22.2 million tons in 2004-05, up 2 million tons or 10 per cent from 2003-04.

Production in China was expected to rebound from 4.9 million tons in 2003/04 to a record of 6.3 million tons next season. But US production may slip 2 per cent to 3.9 million tons, partly due to competition from soybeans.

Cotton was not price-competitive with chemical fibers, despite the recent increase in crude oil prices. As a result, world cotton mill use is expected to stagnate in 2003-04 and increase by less than 1 per cent in 2004-05, to an estimated 21.3 million tons. Mill use outside China may fall 1 per cent to 14 million tons in 2004/05. Consumption in China would rise 5 per cent to 7.3 million tons, 34 per cent of the world total.

Fuelled by China's imports, exports may gain 7 per cent in 2003-04, surpassing 7 million tons for the first time. US exports may touch a record 3 million tons, with its share in world exports at 42 per cent, the highest since 1960-61.

The gap between production and use in China was expected to shrink to 1 million tons in 2004-05. Imports by China may decline from 1.65 million tons projected this season to 1.35 million tons in 2004-05.

World exports may decline to 6.4 million tons in 2004-05. US exports may dip to 2.5 million tons. With production expected to outpace mill use and reduced imports by China in 2004/05, the Cotlook A Index is projected to fall to 64 cents per pound, down 11 cents or 15 per cent from the projected average for 2003-04.