The International Cotton Advisory Committee nudged higher, again, its forecast for cotton prices in 2017-18 as it cut its forecast for the build in world stocks of the fibre, and flagged higher values of rival polyester.
The intergovernmental group pegged at 77 cents a pound its forecast for cotton prices, as measured by the Cotlook A index of physical values, for this season. The figure still implies that the committee expects prices to fall over the rest of this season, with values so far in 2017-18, which started in August, averaging 82.4 cents a pound. The Cotlook A index – which, in including an element for transport is typically higher than the New York futures prices – stood on Thursday at 87.25 cents a pound.
Polyester vs cotton prices
Nonetheless, the latest price estimate represented an upgrade of 3 cents on the ICAC’s forecast last month, which was in turn an upgrade of 2 cents month on month. The committee was, at the start of 2017-18, foreseeing a season-average price of 69 cents a pound. However, it flagged that the “competing price of polyester has risen over the course of the season” – indeed, buoyed by higher oil prices, increased at a faster rate than cotton values.
The polyester price “continues to increase relative to cotton, even as cotton prices have moved upward”, the ICAC said.
‘Crop losses from pink bollworm’
The comments also came as the committee trimmed by 100,000 tonnes, to 18.88m tonnes, its forecast for world cotton stocks at the close of this season, citing in part a downgraded production figure. “India and Pakistan… encountered production losses from pink bollworm this season,” the organisation noted.
With hopes for consumption raised too, inventories were now seen rising by a modest 140,000 tonnes during 2017-18, albeit avoiding a third successive season of decline.
The forecast contrasts with an expectation last week by Cotton Outlook itself, which is in charge of the Cotlook A, that world stocks will rise by 324,000 tonnes over 2017-18 – an upgrade from a previous estimate of 258,000 tonnes. The revised figure reflected an increased estimate for China’s latest harvest, upgraded by 190,000 tonnes to 5.67m tonnes – a rise of nearly 1m tonnes year on year.
The US Department of Agriculture, which upgrades its data next week, currently foresees world cotton stocks building by 150,000 bales (33,000 tonnes) over 2017-18.