WASHINGTON — Cotton prices are expected to remain at record-high levels this year, due to a tight supply-and-demand situation, which was borne out by a new report released Wednesday by the U.S. Department of Agriculture.
According to the USDA, cotton stock levels among three of the five top producers in the world, including China, the U.S. and Pakistan, are estimated to end the marketing year on July 31 at record-low levels, which will continue to drive high cotton prices globally and increase pressure on the entire supply chain, from yarn spinners all the way to the consumer. India and Brazil showed slight increases.
In the U.S., the third-largest cotton producer, stock levels are projected to fall to 1.9 million bales by July 31, from ending stock levels of 2.94 million bales in the 2009-10 marketing year, according to the USDA. The U.S. is expected to produce 18.3 million bales in the current year ending July 31, consume 3.6 million bales domestically and export 15.8 million bales.
Cotton stock levels in China, the world’s largest producer, are estimated to fall to 13.2 million bales from ending stock levels of 15.2 million bales in the 2009-10 year. China is estimated to produce 30 million bales. That was coupled with an existing stock level of 15 million bales and imports of 15 million bales. The country is estimated to consume 47 million bales annually.
“It means everybody in the cotton industry is furiously calculating, literally to the day, how much cotton they will need and what day they need it to arrive in the mill, and it is going to be very, very tight,” said Terry Townsend, executive director of the International Cotton Advisory Committee. “The world cotton market is desperately looking for cotton somewhere, but there is no indication that the harvest in China, India or Pakistan is any better than previously expected.”
Gary Adams, economist for the National Cotton Council, said, “We all know prices are at really unprecedented levels and a lot of that does come back to what is a fairly tight supply-and-demand situation right now. Prices are at record highs, really at the highest levels since the Civil War.”
The USDA’s report followed the National Cotton Council’s forecast released Friday showing a tight cotton supply-and-demand situation this year. Adams said demand has bounced back significantly since the recession, but recent production problems, such as recent flooding in Australia and earlier floods in Pakistan, have been contributing factors to the overall increase in cotton prices on the global market.
On Wednesday, one cotton price index, known as the A index hit $2.05, while the New York futures price traded as high as $1.82, more than double what they were a year ago.
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