Cotton prices to remain strong in 2011/12

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Global cotton production is expected to rise by 12% to a record of 27.4 million tons in 2011/12, driven by an expansion in plantings in most producing countries.
However, the projected increase in production is relatively small considering the doubling of prices experienced in 2010/11. Competition from food crops and limited resources (including land, seeds, water, and equipment) are preventing cotton area from rising further in 2011/12.
Rising cotton supplies will feed demand in 2011/12, but high prices and competition from chemical fibers are expected to limit growth in mill use to 3%.
World cotton production is projected to exceed mill use in 2011/12 by 1.8 million tons. As a result, ending stocks are projected to increase to 10.1 million tons. The world ending stocks-to-use ratio is projected to rebound from 33% in 2010/11 to 40% in 2011/12, still well below the ten-year average of 50%.
The International Cotton Advisory Committee – ICAC Price Model forecasts a 2011/12 season-average Cotlook A Index of $1.38/lb. The 95% confidence interval extends from $1.19 to $1.59 per pound. This forecast implies a 15% decline with respect to the 2010/11 expected average of $1.62/lb, but would remain considerably higher than the ten-year average of 60 cents per pound prevailing from 2000/01 to 2009/10.
However, caution must be exercised since all commodity markets are subject to great uncertainty. As with any model, the ICAC Price Model is based on a limited number of explanatory variables. Furthermore, the explanatory variables are themselves preliminary estimates or projections obtained under imperfect information.

International Cotton Advisory Committee – ICAC

(Source: http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=97396)

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