The International Cotton Advisory Committee slashed hopes
for cotton prices to a five-year low, citing the prospect of a jump in inventories
in exporting nations to a record high.
The ICAC cut by 5 cents to 80 cents a pound its forecast for
the average 2014-15 cotton price, as measured by the Cotlook A index of
physical values which, in including an element for transport, typically trades
at a premium to New York futures.
The downgrade, to the lowest since the 78 cents a pound
recorded for 2009-10, came as the intergovernmental group lifted by 530,000 tonnes
its forecast for world production in the season.
It raised by 620,000 tonnes its estimate for inventories at
the close of the marketing year, to an all-time high of 22.25m tonnes (102m
'Negative pressure on
Signally, this inventory figure comprises record stocks outside
China, of 9.7m tonnes (44.6m bales) - in contrast to recent seasons when the
relatively low supplies available to the world market have supported prices.
ICAC world cotton forecasts, change on previous and (year on year)
Production: 26.05m tonnes, +530,000 tonnes, (-40,000 tonnes)
Consumption: 24.37m tonnes, -130,000 tonnes, (+40,000 tonnes)
Imports: 7.97m tonnes, +40,000 tonnes, (-1.05m tonnes)
Exports: 7.97m tonnes, +40,000 tonnes, (-1.04m tonnes)
Ending stocks: 22.25m tonnes, +620,000 tonnes, (+1.69m tonnes)
The 2014-15 expansion in world ending stocks outside China "will
put negative pressure on prices this season as China continues to liquidate its
significant stocks", the ICAC said.
Previously, world stocks have been concentrated in China,
where a programme of guaranteed prices to farmers prompted a huge build in
government inventories, essentially removing these supplies from the world
This season, a rejig in China's farm support regime is
leading to some selling of state inventories, reducing the country's need for
The committee's upgraded production estimate reflected increased
hopes crops in all the big-three producing countries – China, India and the US –
but particularly for India, for which the estimate was lifted by some 300,000
tonnes to 6.3m tonnes.
"Due to the late arrival of the monsoon, the planting season
was extended and area in India is estimated at 11.8m hectares, up by 1.3% from
2013-14," the ICAC said.
Separately, the US Department of Agriculture's New Delhi
bureau pegged Indian output at 29.5m bales (6.4m tonnes), citing a rise of 3.4%
to 12.1m hectares in sowings, besides improved yield expectations.
"This is due better agronomic practices adopted by farmers
coupled with renewed efforts by the government to provide assistance and improve
yields under the National Food Security Mission," the bureau said.
'Vie for the title'
However, it is as yet unclear whether India will take the
crown of top world cotton producer from China, for which the ICAC lifted its production
forecast by 200,000 tonnes to 6.4m tonnes.
"China and India will vie for the title of largest producer
of cotton, as the full impact of this year's monsoon on India's yields is
unknown," the committee said.
The ICAC, citing "much-needed rain", lifted its forecast for
US production by 200,000 tonnes to 3.7m tonnes (17.0m bales), although this
remains below a USDA estimate of 3.81m tonnes.
In New York, the benchmark December cotton contract was 0.4%
higher at 65.55 cents a pound in early deals.