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ICAC hikes cotton price forecast, as demand hopes rise

ICAC hikes cotton price forecast, as demand hopes rise

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.

Key ratio

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.

Demand upgrade

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)

ICAC hikes cotton price forecast, as demand hopes rise Reviewed by on . 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, notin 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, notin Rating: 0
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