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attended the recent 10th African Cotton Association annual congress in Victoria Falls that China had purchased 2 700 000 tonnes of cotton in the 2011/12 season and had a further 1 000 000 tonnes of foreign cotton.
“China’s intervention price of 19 800 yuan per tonne in the 2011/12 season has also guaranteed markets of the availability of cotton so there is no reason to effect changes in the prices,” he said.
Globally, China is one of the leading producers of the white gold and also happens to be the biggest consumer of the product. He added that the balance of probability did not point towards a repetition of the pricing crises of the 2010/11 season in the foreseeable future. Prices of around US$1 per kilogramme will be the order of the day while the average will be around US$0,70 per kilogramme, said Mr Edwards.
Oversupply, he said, was not a result of producers scoring high yields but was due to low consumption as consumers ventured into alternatives such as synthetic fibre. “We will not see runaway prices of cotton this season as consumption has fallen significantly against a big increase in supply that will not fall short of seven million tonnes globally. China has close to four million tonnes of this total.
“There is lack of buying confidence at the moment from the primary product right to the textile value chain,” said Mr Edwards.
He added that last December there was a moderate upturn of prices that fluctuated thereafter.
Mr Edwards revealed that the total hectarage that goes under cotton ona global scale during the production process has never gone beyond 36 million hectares at any given time but had swung between 30 million hectares and 36 million hectares at most even if the product was fetching very high prices on the markets.
Speaking at the same occasion, president of the International Cotton Advisory Committee Mr Andrei Guitchounts said last season had a record price volatility of about 100 percent with an average of 30 percent volatility that in normal years is the total volatility percentage for a whole year.
He said cotton supplies were limited during the first eight months of the year with the weak demand increasing the levels of stocks.
“The cotton industry has lost a huge market share and its hedging capacities have also fallen.
By January this year prices had stabilised because of China’s consistent activities on the markets and volatility has returned to a normal of 30 percent.
“If prices remain above the long-term average, this will contribute towards increased chances of expansion in the area put under cotton in future,” he commented.
Mr Guitchounts said cotton stocks would this year rise by 40 percent then by another 10 percent next season with China accounting for a quarter of the world’s cotton stocks.
He also explained that factors such as the unexpected surge in demand, broken contracts by both sellers and contractors, speculative behaviour, floods in countries such as Pakistan, unexpected government interventions and sometimes the collapse in mill use had greatly affected the prices of the lint in the 2010/11 season.
The delegates generally felt that if supply and demand were not evenly balanced and monitored closely the industry would remain stagnant for some time, which was detrimental to developing economies.
Online Reporter