One of the reasons for the uptrend is obviously the fact that world cotton consumption is projected to outstrip production in the coming season. ICAC also states that a change in the status of China from net exporter in 1999-2000 to net importer in 2000-01 is expected to contribute to higher international prices.

As per ICAC review, with two months left in the current season, the average season-to-date Cotlook A Index is 51 cents per pound. With prices expected to remain at current levels, or even increase at the pace of the last four months, the average Cotlook A Index for 1999-00 is likely to be near the expected 53 cents per pound.

As demand for cotton is expected to grow more rapidly than production next seasons, world ending stocks are likely to reach a five-year low and the Cotlook A Index is expected to exceed 60 cents per pound in 2000-01. According to current projections, ICAC provisionally places the average Cotlook A Index at 62 cents a pound in 2000-01 as against 53 cents in 1999-00.

ICAC has raised the production estimate slightly from 18.94 million tonnes (mt) to 19.08 mt now. In the case of world cotton consumption, ICAC has brought it down from 20.2 mt to 19.94 mt. Thus, consumption, which was earlier expected to cross the 20-million tonne mark is now projected to remain below that level.

A comparative estimate of the world cotton balance sheet for 1999-2000 and 2000-01, as drawn up by the ICAC on June 1, 2000 is reproduced below: Reviewing the crop prospects for the 2000-01 season, ICAC states that cotton production is expected to decline in 29 countries with the most significant declines taking place in China and Pakistan. However partially offsetting this decline, production is expected to increase in 28 other countries, most notably in USA and Brazil, which account for 6,00,000 tonnes of additional world production. Cotton production is expected to increase by an aggregate 1,60,000 tonnes in another 26 countries.

As for consumption, ICAC forecast is that it will increase for the second consecutive year and is expected to reach 19.9 mt in the ensuing season. In 1992-93, world consumption was stagnant and remained around 18.5 mt through 1995-96.

In contrast, world consumption is increasing at a vigorous 3.4 per cent in 1999-2000 and is expected to continue to increase 1.4 per cent in 2000-01. In 1992-93, states ICAC, mill consumption of cotton declined in 68 countries, mainly in Russia, Japan and Korea, and increased in 51 countries, notably China, India and USA. In contrast, in 2000-01 declines in mill consumption are expected to take place in 19 countries, mainly in China, USA and Germany, while 63 countries are expected to consume more cotton, with the bulk of the increase concentrated in India, Turkey, Pakistan and nine other coutnries.

The prices for upland cotton in China reportedly increased to more than 70 cents per pound during March this year. Given the current level of cotton prices in China, the share of chemical fibres is expected to increase next season and cotton consumption may decline to 4.7 mt from an estimated 4.8 mt in 1999-00.

However, according to ICAC, Chinese cotton stocks may still decline by about one million tonnes next season. Assuming that a proportion of these stocks might be of low quality, and that stock allocation to textile mills might involve time-consuming logistical problems, domestic prices may reach higher levels unless the Government allows generous imports of high quality cotton. ICAC review states that imports of 2,00,000 tonnes may be necessary to meet the needs of textile mills. The Government of China is stated to have already issued licences to import 1,00,000 tonnes of cotton for domestic textile units but this cotton will probably be shipped after July.

Encouraging reports on cotton sowings in Northern India
Reports emanating from different authentic sources seem to indicate that cotton sowings in the irrigated north zone this year have been brisk and more extensive than last season. Approximately, 14.20 lakh hectares are stated to have been planted in the three states of Punjab, Haryana and Rajasthan as per reports received by the first week of June. By the corresponding period last year, the area reportedly planted was lower at around 13.85 lakh hectares. This year, cotton plantings in Punjab appear to have been particularly higher at 5.40 lakh hectares so far, as against 4.65 lakh hectares by the same time last year.

The total cotton area targeted by the state Governments of the above three states during the current season is reported to be 18.3 lakh hectares, as against 14.5 lakh hectares estimated to have been covered during 1999-2000.As per reports, monsoon has advanced and appears to have reached the three central states of Gujarat, Maharashtra and Madhya Pradesh , facilitating the commencement of cotton sowings. The next three-four weeks will largely determine the cotton area in this zone during the current season. Although the timely onset of monsoon normally favours cotton plantings, it is to be seen whether this will be the case during the current year as well.