Cotton plantings for the 2012/13 season will start in a few months. After jumping to record highs in 2010/11, cotton prices dropped sharply in the current season, reducing farmers’ incomes and decreasing for the first time in three years the attractiveness of this crop when compared to that of its main alternatives. In addition, agricultural production costs have increased since 2011/12 plantings.
As a result, cotton area in many countries is expected to decline in 2012/13. The Secretariat projects global cotton area to contract by 8% to 33.3 million hectares and production to decrease by 6% to 25.1 million tons.
The anticipated reduction in global cotton area in 2012/13 is consistent with the magnitude of the decline in cotton prices experienced since last season. The Cotlook A Index dropped by a third, from an average of 164 cents/lb in 2010/11 to an average of 112 cents/lb in the first four months of 2011/12.
Over the 29 seasons preceding 2010/11, there was a positive correlation between year-to-year variations in the Cotlook A Index and year-to-year variations in world cotton area: an increase of 10% in the Cotlook A Index was usually followed by an increase of 3% in world cotton area and vice-versa. Based on this historical relationship, world cotton area would be expected to fall by 9% in 2012/13. If cotton prices decline further over the next few months, this might translate into a larger decline in cotton area in 2012/13. read more,... see attached info