The International Cotton Advisory Committee hiked its forecast for cotton prices next season as it lifted to a six-year high its estimate for consumption, noting improvements expected in India and Pakistan.
The intergovernmental group, which had forecast prices as measured by the Cotlook A index falling to a nine-year low in 2015-16, lifted its forecast by 10 cents to 72 cents a pound.
That took it above the 71 cents a pound expected for this season, an upgrade of 1 cent from last month’s forecast.
The Cotlook A index of physical prices, which in including an element for transport typically trades at a premium to New York futures, was pegged on Monday at 72.30 cents a pound.
The ICAC bases its price projections on a composite of factors, including stocks-to-use ratios for countries excluding China, whose supplies, in being unavailable to the world market, are seen as having less impact on prices.
The ICAC estimates – which had last month implied stocks-to-use ratio for world cotton, excluding China, holding at some 56% – now forecast a drop below 53%.
That took it nearer the ratio of 51% seen in both 2012-13 and 2013-14, when the Cotlook A averaged 88 cents a pound and 91 cents a pound respectively, according to the committee.
The stocks-to-use ratio, in giving an indication of the availability of a raw material compared with demand, is seen as a key indicator of price potential.
The ICAC raised its estimate for world cotton consumption in 2015-16 by 460,000 tonnes to 24.93m tonnes, the highest since 2009-10.
Use in China, the top consuming country, is expected to hold at 7.7m tonnes, supported by a drop in prices from an average of 139 cent a pound in 2013-14 to a little under 100 cents a pound in the first five months of this year.
Meanwhile, “consumption in India, the second largest consumer of cotton lint, is projected up 3% to 5.4m tonnes in 2015-16,” the committee said.
“Despite strong competition from yarn imports, Pakistan’s consumption is expected to grow 3% to 2.6m tonnes,” it added.
Inventories to fall
Thanks to the increased consumption hopes, the forecast for stocks at the close of next season was cut by 440,000 tonnes to 20.79m tonnes.
That would represent a drop of more than 1.0m tonnes year on year, and the first decline in stocks in five seasons.
(Source – http://www.agrimoney.com/news/icac-hikes-cotton-price-forecast-as-demand-hopes-rise–8404.html)