London, May 02 2009

World cotton production is forecast to exceed mill use in 2009/10. As a result, world cotton stocks are expected to increase by 2% to a record of 13.4 million tons by the end of July 2010.

World cotton production is forecast slightly lower in 2009/10 at 23.4 million tons. Decreasing returns, more attractive prices for competing crops, and expected difficulties in financing inputs are discouraging farmers from planting cotton. Increases in production in India and the United States could be more than offset by declines in China (Mainland) and Brazil.

World cotton mill use is expected to increase slightly to 23.1 million tons in 2009/10, assuming a modest recovery in world economic growth in 2010. Cotton mill use is expected to partially recover in China (Mainland), India and Pakistan, but to continue to decline in many smaller consuming countries in Asia, North America and Europe.

World cotton trade is expected to partially recover in 2009/10. World imports are projected 11% higher at 6.6 million tons. An expected increase in imports by China (Mainland) to 1.7 million tons would significantly contribute to this rebound. India is expected to account for most of the expected rise in exports, with shipments forecast to more than double to 1.2 million tons.

Based on a price forecast of 59 cents per pound for 2008/09 and an expectation of rising stocks, the ICAC Price Model 2007 forecasts a season-average Cotlook A Index of 57 cents per pound in 2009/10 (the 95% confidence interval is between 46 and 65 cents per pound). However, major uncertainties regarding projected cotton trade in 2009/10 pose substantial downward risks to the forecast.

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