05 Jan 2011

US: Cotton shortage means prices to remain volatile

International Industry News, Textile News Comments Off

Cotton prices are likely to remain volatile, sector experts have warned, after the latest figures show this season’s cotton supply is almost sold out.

According to the International Cotton Advisory Committee (ICAC), only about 10% of projected world trade of 8.3m tons is still available for purchase at this relatively early stage of the season.

And while countries like Australia and Brazil have responded to the global shortages and record prices by expanding their production substantially, this cotton will not become physically available until April 2011.

Pic: This season's cotton supply is almost sold out

Which means the current scarce uncommitted supply may provide strong pressure on prices and cause increased volatility through the rest of the season, the ICAC cautions.

The latest data from the inter-governmental group shows that cotton prices as measured by the Cotlook A index surged from 86 cents per pound on 2 August 2010 to a record 186 cents per pound on 22 December 2010.

The Cotlook A Index retreated to 172 cents per pound on 31 December 2010 – but the season average reached 129 cents per pound, 66% higher than the 2009/10 average of 77.5 cents per pound.

Similar trends were recorded at the ICE exchange in New York trading the cotton futures contract.

The surge in prices in 2010/11 was due to relatively low world stocks of cotton, limited supply, robust demand and a very low level of uncommitted cotton.

It is estimated that as of end-December 2010, US export commitments exceeded 3.1m tons, or 90% of projected exports for the season.

The US is the largest exporter of cotton, accounting for an estimated 41% of world exports in 2010/11. Exports by India, the world’s second largest exporter, were capped by the government below 1m tons, all of which have been committed.

Central Asian commitments are estimated at over 1m tons, or 85% of projected exports.

Meanwhile, cotton growers in Australia are still waiting to count the cost of the extensive floods which have devastated many cotton-growing areas in central and southern Queensland.

Farm operator PrimeAg Australia said that 13% of its 15,200-hectare cotton crop had been inundated by flood water.

While some of this will be lost, other areas may recover if the period of inundation is less than two to three days, the company said today (4 January), adding: “It will be at least a week before the damage levels become clear.”

Source: just-style.com
By: Leonie Barrie | 4 January 2011


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