World cotton consumption is set to fall by 3% during the current season thanks to an ongoing slowdown in demand and a continuing switch to man-made fibers, but is set to rebound next year according to the latest figures from an inter-governmental group.
Despite firm global economic growth, the International Cotton Advisory Committee (ICAC) now estimates global consumption at 24.5 million tons in 2010/11.
It says demand from spinning mills has slowed in the second half of this season, with firms caught between high cotton prices and difficulties accessing credit on one side, and declining prices of cotton yarn on the other. Stocks of cotton yarn have also accumulated at many mills.
Meanwhile, prices of man-made fibers have remained much lower than cotton, encouraging a switch by spinners.
Looking ahead, cotton mill use is expected to rise by 3% to 25.2 million tons in 2011/12. This will be driven by projected global economic growth and boosted by increased production, but moderated by relatively high cotton prices and competition from man-made fibres.
Overall, world cotton production is likely to increase by 11% to 27.4 million tons in 2011/12, driven by the high cotton prices received by farmers the year before. Production will grow in most large producing countries, with the exception of the United States.
And higher production and consumption is set to push the global cotton trade up by 5% to 8.2 million tons in 2011/12, the ICAC says.
Imports by China are expected to increase by 24% to 3.3 million tons, assuming a rebound in mill use and a rebuilding of stocks from historically low levels. The increase in exports will be driven by Brazil and Australia, while US exports could decrease due to a reduction in exportable supplies.
Prices on the Cotlook A Index averaged $1.64 per pound in 2010/11, 112% higher than in the previous season. And while the season-average is likely to “decline significantly” in 2011/12, it will probably remain above the average of $0.60 per pound during the last decade.