ICAC cuts world cotton price forecast 10 percent

An international farm group said on Friday it cut its forecast of the season-average world cotton price by 10 percent due to slumping demand brought on by the global recession and larger stockpiles in China. The International Cotton Advisory Committee reduced its 2008/09 season-average Cotlook A Index to 61 cents per pound, down from 68 cents per pound predicted earlier in the month.
"The magnitude of the government intervention in China (mainland) is substantial," ICAC said, referring to China's policies on trade that have impacted the cotton market. China, a leading consumer and producer of cotton, is expected to see its net cotton imports in 2008/09 fall to 7.5 million 480-pound bales, compared with 11.53 million 480-lb bales a year earlier, according to the US Agriculture Department. ICAC revised its cotton price forecast to reflect this projected drop in imports as China strengthens efforts to build up its state reserves.
To stave off unrest among Chinese cotton farmers as prices tumble, China intends to purchase 2.72 million tons of cotton - about a third of its harvest this year - from its farmers at premium prices.
Chinese reserves of cotton totalled 1.8 million tons as of January 14, which is 23 percent of the country's projected production for 2008/09 and 19 percent of what China intends to use in the year, ICAC said. With more cotton on hand from domestic sources in China, other cotton-exporting countries will feel the pinch as Chinese demand for their product declines.
WORLD MARKET PRICE FOR UPLAND COTTON: The US Agriculture Department set the prevailing world market price for upland cotton at 38.42 cents per pound, effective through January 29. The price is adjusted to US quality and location for Strict Low Middling, 1-1/16 inch upland cotton.
Separately, USDA announced a special import quota for upland cotton that permits importation of a quantity of upland cotton equal to one week's domestic mill use. The quota will be established on January 29, allowing importation of 17,335,657 kilograms (79,622 bales) of upland cotton. The next announcement for upland cotton will be on January 29.