Declining mill use is expected to cause another increase in world cotton stocks by the end of the 2009-2010 marketing year, the International Cotton Advisory Committee says.

In its monthly update on Friday (May 1), the ICAC forecast world cotton production will be slightly lower – 107 million bales – than it estimated at the end of March when it said the 2009-2010 crop could reach 108 million bales.

World cotton mill use is expected to increase slightly to 106 million bales – from 105 million – but will still remain below world cotton production. The result: A 2 percent increase in world cotton stocks to a record 62 million bales by July 31, 2010.

“Decreasing returns, more attractive prices for competing crops, and expected difficulties in financing inputs are discouraging farmers from planting cotton,” the ICAC said. “Increases in production in India and the United States could be more than offset by declines in China and Brazil.”

The ICAC said its forecast of an increase in world cotton mill use assumes modest recovery in world economic growth in 2010. Cotton mill use is expected to partially recover in China, India and Pakistan, but to continue to decline in many smaller consuming countries in Asia, North America and Europe.

An association of cotton producing and consuming countries, the ICAC said world cotton imports are projected 11 percent higher at 30 million bales. “An expected increase in imports by China to 1.7 million tons (7.8 million bales) would significantly contribute to this rebound,” it said.

“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 (5.5 million bales).”

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 Cotton Outlook A Index of 57 cents per pound in 2009/10 (the 95 percent 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,” the ICAC said.