Cotton prices next season will prove their weakest in five
years, the International Cotton Advisory Council said, cautioning over the
slide in Chinese imports prompted by excessive stockpiling.
The ICAC, an intergovernmental group, cut by 2 cents to 87
cents a pound its forecast for average cotton prices, as measured by the
Cotlook A index of physical values, in 2014-15, which starts in August.
The downgrade reflected, besides a small upgrade of 50,000
tonnes to a record 20.92m tonnes in the forecast for world inventories at the
close of next season, an increase in particular in the volume of stocks held
Being freely available to the world market, cotton supplies
held in major exporting countries such as India and the US are seen as having a
particular influence on prices.
'China will be
In fact, the level of stocks held outside China will rise by
7% to 9.1m tonnes over next season, on ICAC estimates.
That is far bigger than the 0.9% increase to 8.53m tonnes
expected by the US Department of Agriculture, whose data are also closely
watched by investors.
"The projected accumulation of cotton stocks will weigh on
international cotton prices in 2014-15, particularly as more stocks will be
held outside of China," the council said, forecasting prices this season
averaging 91 cents a pound.
"China will be importing less of the surplus [world] production
than in the last two seasons."
In fact, China will import just 2.1m tonnes of cotton next
season, on ICAC estimates, below the 2.40m tonnes expected by the USDA, and
down from the record 5.3m tonnes set in 2011-12.
The council's forecast reflects in part the switch China's
subsidy policy from offering a guaranteed price for the fibre to direct
payments to farmers.
The guaranteed price, in being set above the world market
price, fostered the build in China's inventories to some 11m tonnes, in
underpinning domestic values, and prompting mills to favour cheaper imports.
However, the ICAC also highlighted the dent to Chinese
demand from the policy.
"Since 2011-12, the high price of cotton in China hurt its
spinning industry, but helped the spinning industry in other countries, such as
India, Pakistan, Bangladesh, Indonesia, and Vietnam.
"China's consumption fell by 4% in 2012-13 to 8.3m tonnes and
is expected to fall by 1% in 2014-15 to 7.8m tonnes.
Nonetheless, the comments come amid something of a recovery in
New York cotton prices from late May lows, amid revived concerns for the crop
in Texas, the top US producing state.
While much of the southern and central Plains received much-needed
precipitation over the weekend, "showers in west Texas were minimal relative to
weekend temperatures", World Weather said.
And the forecast is for dryness to remain dominant.
"West Texas cotton areas will experience net drying
conditions all of this week and the few showers that evolve periodically this
weekend into next week will be lost to evaporation shortly after they occur,"
the weather service said.
Official crop data overnight showed cotton plantings still
lagging in the state, where farmers had completed 62% of sowings as of Sunday,
13 points behind the average pace.
And on condition, the first rating put 35% of the crop as
good or excellent, up from the 28% last year but below the 47% in early June
New York cotton futures for July stood 1.1% higher at 87.43 cents a pound at 05:30 local time (10:30 UK time), although headway in the new crop December lot was less marked, up 0.1% at 78.10 cents a pound.