Cotton stock/consumption ratio lowest in 15 years

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news_image_2010-08-30_14871[1]In 2010, agents’ expectations since the beginning of the year were confirmed. Cotton prices hit all-time highs in both domestic (in nominal terms) and international markets. The year was marked by firm demand and limited supply, favoring the reduction of ending stocks, which, in turn, reached the lowest ratio stock/consumption in 15 years.
The increase in demand was influenced by the advance in the world economy, while the reduction of supply was attributed to smaller cultivated area and yield reduction in some important producing countries.
at the beginning of the second semester of 2010, purchasers were more prudent in terms of new trades, expecting prices to decrease with the advance of harvesting activities. As a result, increases were less expressive in July.
In August, cotton prices registered a significant increase in the domestic market, influenced by the demand, which surpassed the supply in the spot market. The demand for cotton in Brazil and in the world heated in the second semester of 2010, due to low stocks.
Data from Conab (National Company for Food Supply) indicate that the production in the 2009/10 season was 1.194 million tons, a decrease of 1.6 percent compared to the 2008/09 crop.
Between the last day of 2009 and Dec. 30 2010, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) increased by a whopping 114.86 percent, and closed at 2.9147 or 1.7516 dollar per pound on Dec. 30, a record.
According to data from USDA released on Dec. 10, the world production ought to move up roughly 14 percent in the 2010/11 season, amounting 25.2 million tons. China and Pakistan, the major world producers, will face drops in their productions.
As for the consumption, agents expect that the higher prices to trade will favor the replacement of raw materials, with a reduction of cotton demand. The world demand may decrease 1.8 percent, to 25.3 million tons. The consumption, however, is expected to be higher than the supply, which may reduce ending stocks.

(Source: http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=94545)

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