International cotton prices declined in June and the Cotlook A Index fell to 61 cents per pound, down 19 cents (24%) from the season high in early November 2003. Still, the A Index remains higher than in June 2003, and world cotton production is expected to climb to a record of 22.2 million tons next season. Production in 2004/05 is forecast to be 800,000 tons above world consumption. As a result, world ending stocks are forecast to rise in 2004/05, after declining from 10.5 million tons in 2001/02 to an estimated 7.9 million tons at the end of this season, a 9-year low.

During the first five months of 2004, international prices were at their highest level at that period of the year since 1997. World cotton area is estimated at 34.5 million hectares in 2004/05, up 8% from the previous season, and the highest since 1995/96. Weather conditions have generally been favorable for the 2004/05 crops in the Northern hemisphere and a near-record world yield of 643 kilograms per hectare seems within reach, up 8 kilograms per hectare from 2003/04. As a result, world production is expected to increase by 1.8 million tons in 2004/05. 65% of the increase is expected to occur in China (Mainland).

After increasing by 2.7 million tons between 1998/99 and 2002/03, world cotton consumption is stagnating in 2003/04 due to rising prices. The growing world economy and declining prices will sustain cotton consumption in 2004/05. Mill consumption is forecast to increase by some 300,000 tons to a record of 21.4 million tons in 2004/05. China (Mainland)'s share of world mill use is expected to reach 34% in 2004/05, up from 23% in 1998/99

With supply anticipated to exceed demand in 2004/05 prices will remain under pressure. Market fundamentals suggest that the season-average Cotlook A Index will decline to 62 cents per pound in 2004/05, 8 cents less than the expected average for this season. The season-average A Index is forecast to drop further in 2005/06 to 56 cents per pound.

 

WORLD COTTON SUPPLY AND DISTRIBUTION

. 2003/04 2004/05 2005/06 2003/04 2004/05 2005/06 . Million Tons Million Bales Production 20.373 22.22 22.61 93.57 102.0 103.9 Consumption 21.144 21.42  21.70 97.12 98.4 99.7 Exports 7.187 6.77 6.80 33.01 31.1 31.2 Ending Stocks 7.870 8.66 9.58 36.15 39.8 44.0 Cotlook A Index 69.5* 62* 56* 69.5* 62* 56*

* US cents per pound. Statistical estimates are based on current estimates of supply and use; 95% confidence intervals extend 12 cents per pound above and below each point estimate. THE ESTIMATE FOR 2003/04 IS NOT A PRICE MODEL RESULT.

The International Cotton Advisory Committee is an association of 42 governments of cotton producing and consuming countries. The Secretariat of the Committee publishes information related to world cotton production, supply, demand and prices, and provides technical information on cotton production technology. Detailed statistics are found bimonthly in COTTON: Review of the World Situation, $160 per year. A monthly outlook by fax is also available for $300 per year or on the Internet for $250 per year. Access to the weekly estimates of world cotton supply and use by the Secretariat is also available on the Internet for $500 per year.