Cotton prices may drop as ICAC projects supply surge

WASHINGTON (Commodity Online): Cotton prices may drop as International Cotton Advisory Committee has projected cotton output to the tune of 126 million bales (27.4 million ton) in 2011-12 that would outstrip demand by 9 million bales.
Last year, the production stood at 112 million bales at a 12% difference.
High prices of cotton and competition from chemical fibers will dent demand; ICAC said.
Global ending stocks of cotton are slated to increase to 47 million bales, according to The Business Standard report citing ICAC.
The surge in production is attributed to the proliferation in plantings in most producing countries where the acreage is expected to rise by seven per cent in 2011-12 to 36 million hectares.
However, considering the doubling of cotton prices, the projected surge in acreage is relatively small. Land, seeds, water and farm equipments being diverted to other lucrative crops has lead to this lukewarm rise in acreage.
Earlier, United States Department of Agriculture on April 8th projected lower cotton ending stocks for the marketing year 2010/11 ending on July 31st.
“The World Agriculture Supply Demand Estimates released Friday by the United States Department of Agriculture, projects the world cotton ending stocks of 41.55 million bales (480 pound each) for the marketing year 2010/11. This is 780,000 bales less than the March projection. Considering the ending stocks for 2008/09 season, the world’s cotton stock will end 18.97 million bales less as the ending stocks for the 2008/09 season was 60.52 million bales.”, the report said.
“World’s total cotton supply for 2010/11 season is projected to be 196.65 million bales. The total use is projected to at 155.25 million bales. The United States is projected to supply 21 million bales of which the production is pegged at 18.10 million bales. The U.S production has been lowered by 220,000 bales from the March projection. The U.S. consumption is increased by 100,000 bales from the last month estimate. Chinese domestic consumption is projected to be 47 million bales which remain unchanged from the March estimate.”—the April 9 report added.