Cotton Prices Surge as 2010-11 Supply Almost Sold Out


GLOBAL—Relatively low world stocks of cotton, limited supply, robust demand and a very low level of uncommitted cotton caused the increase in prices in 2010/11. The Cotlook A Index rose from 86 cents per pound on Aug. 2, 2010, to a record 186 cents per pound on Dec. 22, 2010. The Cotlook A Index retreated to 172 cents per pound on Dec. 31, 2010. The season average Cotlook A Index reached 129 cents per pound, 66 percent higher than the 2009/10 average of 77.5 cents per pound. Similar trends were recorded at the ICE exchange in New York trading the cotton futures contract.

It is estimated that as of end-December 2010, USA export commitments exceeded 3.1 million tons, or 90 percent of projected exports for the season. The USA is the largest exporter of cotton, accounting for an estimated 41 percent of world exports in 2010/11. In 2010/11, exports by India, the world’s second largest exporter, were capped by the government below 1 million tons, all of which have been committed.

Central Asian commitments are estimated at over 1 million tons, or 85 percent of projected exports. Australia and Brazil are expanding production substantially, responding to record prices, but this cotton will not become physically available until April 2011. It is estimated that only about 10 percent of projected world trade of 8.3 million tons is still available for purchase at this relatively early stage of the season. The scarce uncommitted supply may provide strong pressure on prices and cause increased volatility through the rest of the season.

The average Cotlook A Index is well above the current International Cotton Advisory Committee (ICAC) 2010/11 season-average projection of 101 cents per pound. The ICAC Secretariat encourages an awareness of the confidence interval around each forecast, rather than an exclusive focus on the point estimate. It also acknowledges that in the current environment of volatility, the ICAC price model may be less relevant than in other seasons. Visit http://www.fibre2fashion.com/news/association-news/icac/

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