Global cotton prices to rise, a little, next season: ICAC

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The International Coffee Advisory Committee sees cotton prices rising next season, despite heavier production, as consumption stabilises, and the market remains in deficit.

Although small, this increase would represent a shift in direction for cotton markets, which have been on a downward trend as worldwide demand eases.

The ICAC forecast International Cotlook A Index to edge up by 2 cents a pound, to 72 cents a pound, in 2016-17, as global cotton stocks continue to fall.

The index is based on a basket of global cotton prices.

The forecast, ICAC’s first for 2016-17, would be the first time cotton prices have risen for three years.

Market in deficit

Despite the stagnant demand outlook, the global cotton market remains in deficit, meaning that demand is outstripping supply.

The ICAC saw world cotton stocks falling by 5% in 2016-17, following on from an 8% drop in the previous season.

This would leave stocks at a 3-year low of 19.4m tonnes.

Heavy production

Global cotton plantings are expected to rise by 1%, to 31.3m hectares, reflecting the fact that although cotton prices have been weak, prices for competing crops have been even weaker.

And with improving yields, the ICAC saw 2016-17 production up by 4%, at just under 23m tonnes.

This would be the first time cotton production has risen year on year

Consumption stabilises

But in China, historically the world’s top cotton consumer, domestic produciotn is expected to fall to 4.6m tonnes, thanks to a 10% reduction is plantings, to 3.1m hectares, after a cut to price support by the Chinese government.

Consumption, meanwhile, is seen stabilising at 23.9m tonnes, after falling by 2% in 2016-17, the ICAC said, as soaring Vietnamese and Bangladeshi consumption outweighs falling Chinese demand.

And global cotton trade is seen recovering by 1%, to 7.5m tonnes, after a 3% drop in 2015-16.

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