INTERLAKEN, Switzerland — International experts project global cotton prices will continue their upward trend of the last few years, but with more stability than the roller coaster prices seen so far in 2011.
Agricultural and trade economists, discussing the commodity at the annual meeting of the Swiss Futures & Options Association here, also feel the world cotton market will be affected in the short term by continued volatility in global currencies, levels of government subsidies, and fluctuations in import and export levels.
In addition, as manufacturers turned more toward synthetic fibers in the last year after cotton prices soared, regaining market share will be challenging, experts said, although cotton products continue to account for the bulk of U.S. textile and apparel trade, according to U.S. government data.
Patrick Catania, head of Asia West Group based in Chicago, said he thinks the range will be anywhere from 80 cents to $1.20 and expects it to price around $1 a pound in the next few months.
On Sept. 13, the U.S. Department of Agriculture in a revised forecast estimated the 2011-12 world cotton crop to reach 123 million bales, a 7 percent increase on the previous year. Production in China is expected to grow 12 percent to 34 million bales, and the U.S. crop to come in at about 16.6 million bales, or about 1.5 million below 2010, while India is forecast to increase 6 percent to 27 million bales, the USDA said. On Sept. 1, the Washington-based International Cotton Advisory Committee, an umbrella group for producing and consuming nations, said global cotton mill use is forecast to reach 24.7 million tons, or 1.5 percent higher than in 2010-11.
Junior Davies, a trade economist at the United Nations Conference on Trade & Development, said movements in dollar-euro exchange rates have had a major influence on African and Asian cotton producers such as Tanzania, Egypt, Morocco and Nigeria, as well as Turkey and Uzbekistan. Davies said a key factor that affects markets is the big outlays in cotton subsidies by countries such as the U.S. and China.
A report by the Organization for Economic Cooperation & Development released Wednesday on agricultural support policies in member nations and some emerging countries shows that while support levels to farmers in rich countries declined in 2010 by 5.8 percent to $227 billion, in China they increased 40 percent to $147 billion. In the U.S., producer support last year declined 18.7 percent to $25.5 billion.
Paul Meier, former chairman of the SFOA, stressed that China and India are “two important swing states” in the global cotton market.
“If they don’t produce enough they import, which puts pressure on the price, and if they have enough, export some production,” Meier said.
Adingra Yao, agricultural economist at UNCTAD, said increases in input costs in fuel and fertilizer in recent years has also translated into an rise in world cotton prices in the last three to four years.