World cotton supply and demand fundamentals may be moving in favour of cotton according to Joe Nicosia, CEO of international cotton entity, the Allenberg Cotton Company.

He cited burgeoning demand from China, India, Pakistan and Turkey as key demand drivers, while variable climatic factors and competition for acreage from other grains could keep pressure on world production.

Addressing the ACGRA Cotton Conference, Mr Nicosia said that while carryover stocks are relatively high following record world production of 120 million bales in 2004-05,  demand is generally increasing at a faster rate than production.

Cotton yields rose 44 per cent between 1986 and 2005 driven chiefly by biotechnology benefits.

The majority of the growth in demand has been from China where usage has risen by 18 million bales in the past five years. Domestic retail clothing purchases in China are growing at a 20 per cent annual rate, while potential for future growth is also huge.

“Continuation of world growth in usage of 4.6 per cent per annum would add about 5 million bales in 2006-07.

“Extension of the drought in parts of the US and wet weather in China would hurt production and have a bullish impact on price, as could competition from other grains and oilseeds for ethanol and biofuels production.

“At current production rates, to keep up with current demand projections, new cotton production of 20 million bales will be required, hence if yields and acreage do not keep rising, cotton prices will,” he said.