Decline in US dollar value, lower crop estimates, rising Chinese demand, rise in crude prices and uncertainity over the conflict in Iraq is expected to move up the international cotton price indicator, Cotlook A Index, to average at about 63 cents per pound next season, predicts the International Cotton Advisory Committee (ICAC).
International cotton prices have already started moving northward as the indications of lower cotton crop surface in the various corners of the world.
The Cotlook A Index rose from less than 50 cents per pound at the beginning of 2002-03 to 61 cents per pound in March 2003.
Prices of synthetic fibers are rising sharply following the surge in crude oil prices. Commodity prices have tended to follow the rise in oil prices.
The slow decline of the US dollar has also had a positive impact on cotton prices in dollars.
However, higher energy costs have been a strong factor in previous economic recessions. Consumer and business confidence weakened worldwide due to uncertainty about the duration and the consequences of the war in Iraq, raising concerns about world end-use cotton consumption
According to ICAC, an association of 42 governments of cotton producing and consuming countries, world production is estimated at 19.1 million tons in 2002-03, down 2.4 million tons (11 per cent) from the record set the previous season and 1.7 million tons less than expected consumption.
World ending stocks are forecast to shrink to 8.9 million tons by July 31, 2003, the lowest since 1994/95. As a result, the Cotlook A Index rose from less than 50 cents per pound at the beginning of 2002-03 to 61 cents per pound in March 2003.
According to ICAC, 2003-04 cotton plantings are starting with international prices at their highest level in two years.
World production is currently forecast to rise 1.8 million tons (9 per cent) to 20.9 million tons in 2003-04, while cotton mill demand is projected up 200,000 tons to 21 million tons.
These supply and demand estimates suggest that the Cotlook A Index will average 63 cents per pound next season.
This would be the highest average in six seasons, but still below the 30-year average of 70 cents per pound.
