AUSTRALIAN farmers looking to plant a record cotton crop this year have been dealt a favour with several key price factors pointing towards support for cotton values.
Currently, the Australian cotton price hovers at just below $500 a tonne, but earlier this month the International Cotton Advisory Council (ICAC) lifted its cotton price forecast based on weakening prospects of a world production rebound.
While Australia is expecting a production rebound, internationally ICAC expects stocks to shrink to a five year low.
ICAC forecast this would lead to a seven per cent rise in average cotton prices globally, however this is coming off a low base, with cotton futures earlier in the year touching their lowest levels in seven years.
ICAC’s numbers for production in the US are significantly lower than those put out by the US Department of Agriculture, while it also forecast the Indian plant to drop, although yields are likely to be better than during last year’s drought on the subcontinent.
There are also fresh concerns about the level of damage to the US cotton crop caused by Hurricane Matthew earlier in the month.
This will all lead to an erosion of the massive stockpile of cotton stocks in China which has been a large factor in the depressed cotton price in recent times.