Cotton prices may fall

The International Cotton Advisotry Committee (ICAC) Secretariat forecasts that the season-average Cotlook A Index in 2016/17 will range between 66 and 83 cts/lb, with a midpoint of 74 cts/lb, which would be 4 cts/lb higher than last season. The current season started with a large shrinkage in stocks, particularly from countries in the Southern Hemisphere, which saw ending stocks in 2015/16 fall by 21 per cent to 1.6 million tonne (mt), the lowest since 2009-10.

The shortage in supply has carried through the first few months of the 2016-17 season, as the bulk of the crop was still being harvested, keeping prices firm. However, world cotton production in 2016-17 is projected to rise by 8 per cent to 22.8 mt, which may put pressure on cotton prices in the latter half of the season. World ending stocks may fall by 7 per cent to 18 mt in 2016-17, though stocks outside of China are expected to grow by 6 per cent to 8.7 million tonne.

With the exception of China, cotton production is projected higher in the top five producing countries. India’s cotton production is forecast to increase by 4 per cent to just under 6 mt, making it the world’s largest producer. Despite declining by 4 per cent to 4.6 mt, China would be the second largest producer in 2016-17. Production in the United States could rise by 28 per cent to 3.6 mt while production in Pakistan recovers by 20 per cent to 1.8 mt as efforts to prevent the reemergence of pink bollworm have been effective.