Demand for cotton, which tumbled sharply after the market's record rally to over $2/lb this spring, and Indian cotton exports will dictate fibre prices in the 2011/12 season (August/July), the chief executive of the world's biggest cotton merchant said Friday.
Joe Nicosia, president and chief executive of Allenberg Cotton Co, told the Ag Market conference of cotton industry analysts there had been a "large shift" into polyester in Asia, the leading consumer of cotton. "How much of the demand has been deferred and how much has been lost will determine the 2011/12 (cotton) pricing," Nicosia told the conference at the ICE Futures US offices in New York.
The US Agriculture Department's monthly supply/demand report in July forecast world cotton consumption in 2011/12 at 116.75 million (480-lb) bales, 2.2 million bales down from its June estimate. On the supply side, Nicosia said a key uncertainty would be how much India, the world's No 2 producer of cotton, exports in the 2011/12 season.
USDA forecast India's cotton exports at 5.0 million bales, up from the 4.8 million bales it estimated in last month's report. Large-scale trading orders are also picking up from Asia as investors there take advantage of arbitrage opportunities between the ICE Futures US cotton contract and Chinese cotton futures, said the Allenberg official. "So much of what is being traded is in Asia," Nicosia said.