World cotton prices are falling

The International Cotton Advisory Committee (ICAC) released its latest report on June 1. As the market expects global cotton stocks to grow for two consecutive years, international cotton prices have fallen sharply in recent weeks. The ICAC Secretariat expects inventory to jump by 43% to 13.3 million tons in 2011/2012, and another 9% in 2012/2013 to 14.5 million tons. By the end of July 2013, global cotton stockpiles will account for 61% of consumption, the highest since 1998/99. Other factors that contributed to the decline in cotton prices are: Texas rainfall is conducive to cotton growth, the uncertainty of the European economy and the strength of the US dollar exchange rate.

In 2012/2013, global cotton production is expected to decrease by 7% to 25.1 million tons as prices decline. The global cotton volume for textiles is expected to increase by 3% to 23.9 million tons due to improved economic growth and lower cotton prices. Global trade volume is expected to fall by 8% to 8.1 million tons. Mainland China imports will drop from a record 4.6 million tons to 3.3 million tons, while imports from other regions will increase by 15% to 4.8 million tons due to lower cotton prices and recovery of consumption.

In 2011/2012, 75% of the increase in global inventories is expected to occur in mainland China, most of which is state reserve cotton, and some of them may be auctioned before the arrival of the new year to rotate stocks. This indicates that China's national reserve in 2012/2013 will continue to grow. The report believes that the global inventory size will exert heavy pressure on the international cotton price in 2012/2013, and the price fluctuation will increase due to the uncertainty of China's national reserve cotton.