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MUMBAI, Sept. 6

INTERNATIONAL cotton prices are projected to remain well below the long-term average for the fifth consecutive season in 2002-03 even as supplies are likely to be down and consumption up.

Supply and demand estimates suggest that the Cotlook A-Index will average 53 cents per pound this season, 11 cents or 27 per cent higher than last season, which was the lowest since 1971-72, the International Cotton Advisory Committee (ICAC) said.

Due to a further reduction in ending stocks in 2003-04 combined with an anticipated increase in China's net imports, the Cotlook A-Index is projected to reach 57 cents per pound in 2003-04.

From the all time high of 30.8 million tonnes during the previous season, the world cotton supply (beginning stocks plus production) is expected to decline by 1.1 mt or 4 per cent in 2002-03.

In contrast, demand is forecast to increase by 600,000 tonnes or 3 per cent. As a result, international cotton prices, as measured by the Cotlook A-Index, rose 41 per cent from a 29-year low of 35 cents per pound in early November 2001 to 49.50 cents per pound at the beginning of 2002-03 season.

However, prices remain well below the long-term average of 72 cents pound as ending stocks outside China increased for the seventh consecutive year in 2001-02, pushing the stocks-to-use ratio from 39 per cent in 1999-00 to 54 per cent, its highest level since 1985-86.

World cotton production is expected to decline by 10 per cent from a record 21.4 mt last season to 19.3 mt in 2002-03. World cotton consumption is projected to climb to a record 20.7 mt in 2002-03.

Over the last two decades, the most important single variable affecting year-to-year changes in the Cotlook A-Index was net exports by China.

Net trade by China explains approximately half of year-to-year change in cotton prices.

Following a sharp reduction in domestic production and rising consumption, China is expected to emerge as a large importer of cotton in 2002-03.

ICAC said, adding that net imports by China are projected to increase from about 25,000 tonnes in 2001-02 to 250,000 tonnes this season and to 550,000 tonnes in 2003-04.

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