Cotton experts returned to warning of a "significant" decline in prices of the fibre after hacking their estimate for consumption growth this season, and raising their outlook for the rebuild in inventories.
The International Cotton Advisory Committee cut by 300,000 tonnes, to a "slow" 200,000 tonnes, its forecast for growth in world consumption of the fibre in 2011-12, saying use would be "moderated by still relatively high cotton prices and competition from chemical fibres."
And even this growth, taking total consumption to 24.7m tonnes (114m bales), was dependent on the global economic performance.
"The possibility of a double-dip global economic recession could reduce these expectations," the committee, an intergovernmental group, said.
Supply squeeze eases
With use hopes waning, but production set for a seven-year high of 26.9m tonnes (124m bales), the committee lifted its forecast for world cotton inventories at the close of 2011-12 to 11.2m tonnes (52m bales), representing 23% growth during the season, which ends next July.
As a proportion of use, this would equate to more than 45%, equivalent to more than five months of consumption, and well above the sub-37% figure last season which drove New York futures prices to a record high in March.
The so-called stocks-to-use ratio is a key measure of a commodity’s availability, and therefore of the price it is likely to be able to command.
"The projected increase in the stocks-to-use ratio… could translate into a significant decline in the season-average Cotlook A index," a closely-watched basket of physical prices, the ICAC said.
However, it was "likely that the season-average Cotlook A index will remain above the ten-year average of 60 cents per pound".
The index, which averaged 164 cents a pound in 2010-11, was on Thursday priced at 115.90 cents a pound, up 0.30 cents a pound on the day.
New York’s benchmark December cotton futures contract was 0.5% higher at 106.31 cents a pound in early deals on Friday.