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Cotton Market Shift Seen Down the Road

Report predicts India will overtake China as top cotton supplier in 10 years.

GENEVA — While raw material suppliers might find it challenging enough planning their cotton purchasing for the next six months, they probably couldn’t conceive of forecasting raw cotton production over the next 10 years.

But that’s just what a joint report from the Organization for Economic Cooperation and Development and the United Nations Food and Agriculture Organization has done.

Their “Agricultural Outlook 2013-2022” report predicts cotton production to decline 17 percent in China over the next decade, but to post a robust 25 percent surge in India, positioning it to overtake China as the world’s largest producer. The study also projects world cotton consumption to be marginally below its long-term average by 2022 and to continue to lose market share to man-made fibers. It forecasts global cotton production to expand 1.6 percent annually to reach 29.9 million tons, or marginally slower than consumption that’s expected to expand 1.7 percent.

China’s cotton production is forecast to decrease to 6.39 million tons by 2022, down 17 percent compared with the base period of 2010-12, and the area harvested to contract by 20 percent, said the study. In the same period, cotton production in India is expected to increase to 7.9 million tons by 2022, up from about 6 million tons projected for this year.

The report contends that while domestic consumption of textile products in China is likely to increase, the use of cotton in China will decline due to the “intensification of competition in cotton-spinning products, especially from India and other countries with low-cost labor.” The agencies forecast cotton use in China to decrease 0.4 percent a year over the decade to reach 8.81 million tons by 2022. The fall in China’s cotton usage is also projected to trigger a decline in cotton imports to 2.09 million tons by 2022, down 1.87 million tons, or 46 percent, compared to the base period shipments.

The projections are based on scenarios that assume a world crude oil price of $144.60 a barrel in 2022, up from $112 for this year, and growth in OECD economies increasing 2.1 percent, up from 1.7 percent for 2013. World cotton prices are expected to average $1,750 a ton, up from the average of $1,622 for 2013-14.

But George Christodoulides, chief commodity trader at Geneva-based ICSOS Ltd., was skeptical about the report’s findings.

“I don’t believe in their projections,” he said. “All this is cyclical. You can’t issue any projections 10 years forward.”

On world cotton exports, the report projects shipments from OECD countries in 2022 to reach 4.4 million tons, up from nearly 4.18 million tons in 2013; in developing countries to increase to 3.7 million tons from 3.19 million tons, and in least-developed countries to reach 1.5 million tons, up from 972,668 tons.

The U.S. is expected to retain its rank as the biggest net exporter of cotton, with 3 million tons in 2022, up from 2.75 million tons in 2013.