WASHINGTON (Commodity Online): Cotton prices increased sharply in February 2010. The Cotlook A Index rose from 75.35 cents per pound on February 1 to 85.55 cents per pound on February 26. Cotton prices are supported by strong fundamentals: reduced production and rebounding mill use are expected to generate a 15% drop in global cotton stocks, according to International Cotton Advisory Committee.
Based on the expected change in the ratio of ending stocks to use outside China and the average Cotlook A Index to date, the ICAC Price Model is projecting the 2009/10 Cotlook A Index at 74 cents per pound, 21% higher than in the preceding season. The 95% confidence level extends from 69 cents to 79 cents per pound. The daily Index could remain above 80 cents per pound for some time, but competition with polyester and the expected increase in 2010/11 cotton production could cause prices to return to lower levels for the last few months of the 2009/10 season.
Higher prices paid for 2009/10 cotton, combined with the recent decline in prices of grains and oilseeds and relatively stable production costs, will encourage farmers to increase cotton plantings in 2010/11. World cotton production is forecast to rebound by 10% to 24.4 million tons. World cotton mill use is expected to continue to recover in 2010/11, growing by 3% to 24.8million tons, driven by continued improvement in global economic growth. World cotton trade is projected to increase slightly in 2010/11 to 7.5 million tons. A small reduction in cotton ending stocks is expected in 2010/11.