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Industry
analyst says: Supply/demand favourable
China,
Pakistan, Turkey will be most influential in determining cotton
prices
The
outlook for cotton prices is “brighter than in many years”
because of prospects for improved consumption and reduced carryover,
says Mr Ed Jernigan. Speaking at the annual summer conference of
the Southern Cotton Ginners Association at Franklin, Tenn, he said
that the ‘wild card’ is consumption - how much and where
it will occur. “We now know how many acres there are in most
of the world, and July-November weather will determine what the
final production numbers will be.” Mr Jernigan, who is chairman
and chief executive officer of Globecot, which provides information
and analyses to the fibre/textile industry and handles cotton futures
trading worldwide, said that China, Pakistan, and Turkey will be
the three most influential countries affecting consumption.
“China
is the real star, with consumption projected by USDA at a record
25.75 million bales” (he thinks it could top 26 million bales,
while the rest of Asia is basically stagnant).
China
is quickly moving toward status as the largest supplier of textiles/apparel
to the US market, he said. “They’re rapidly taking market
share away from all cotton-producing countries as a result of increases
allowed through their membership in the World Trade Organization.”
China’s
exports to the United States are up more than 70 per cent in volume,
Mr Jernigan said. At the same time, their domestic consumption will
be robust - “higher than anyone has forecast.” Additionally,
a more competitive currency situation than other countries vis a
vis the dollar, abundant cheap labor, political stability, and reliable
shipping will help make China a formidable competitor for the lucrative
US market. “They’ve quickly learned to become the Wal-Mart
of the textile/apparel business.”
Turkey,
which continues to dominate in sales to the European Union, is trying
to join the EU, Mr Jernigan said, but is having problems with its
currency, which “has weakened dramatically.” Consumption
is expected to be down sharply in the EU - from 20 per cent to 50
per cent - and “there’s not much potential” for the
United States to compete with Turkey in that market.
Pakistan
is significantly boosting its yarn exports to China and other countries,
including increases in the US market. The remaining cut-and-sew
operations in the United States “are operating almost at capacity”
he said, “and a lot of their yarn is coming from Pakistan.”
The much-vaunted Caribbean Basin Initiative (CBI) is “seeing
its influence waning” in terms of cotton use, “with little
room to grow,” Jernigan said. Mexico, too, holds little growth
potential for US cotton.
Russia,
on the other hand, “shows surprising potential for expanding
usage.” Consumption is increasing, the country has made new
investment in textile manufacturing facilities, with fabric output
up by 24 per cent, “and they pay on time.”
The
outlook for world ending stocks for the 2002-03 marketing period
“looks a lot more promising than for the past two years,”
Mr Jernigan said.
Factors
influencing the outlook are reduced production in the US (17.5 million
bales versus 20.3 million last year) and China (20.4 million versus
24.4 million), expected reductions in India’s crop due to lack
of monsoon rains, and potentially greater consumption in China,
Turkey, and Pakistan.
Source:
www.agriclick.com
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