Topics. Season-Average Cotlook A Index. Cotlook A Index (daily) Outlook for Cotton Supply, Use and Prices

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Outlook for Cotton Supply, Use and Prices Secretariat of the International Cotton Advisory Committee Topics Causes of volatility in 1/11 Declining prices in 11/1 How to address price

75 17 13 9 7/ /9 9/1 11/1 35 75/7 /3 9/9 9/97 3/ 1/11 5 1-Aug-7 1-Aug- 1-Aug-9 1-Aug-1 1-Aug-11 Price Volatility by Season: Cotlook A Index Difference with respect to season average 5%

1 Outlook for Cotton Supply, Use and Prices Secretariat of the International Cotton Advisory Committee Topics Causes of volatility in 1/11 Declining prices in 11/1 How to address price volatility 7 th Plenary Meeting of the ICAC Buenos Aires, Argentina September, 11 Season-Average Cotlook A Index US cents/lb Cotlook A Index (daily) US cents/lb 5 1/ / /9 9/1 11/ /7 /3 9/9 9/97 3/ 1/ Aug-7 1-Aug- 1-Aug-9 1-Aug-1 1-Aug-11 Price Volatility by Season: Cotlook A Index Difference with respect to season average 5% Season highest value 5% 3% % Coefficient of Variation of Cotlook A Index % -5% 1% Season lowest value -5% 7/75 /1 /7 9/93 9/99 /5 1/11 1/11: 1 August - 7 June % 7/75 /1 /7 9/93 9/99 /5 1/11 1

Nearby Cotton Futures and Cotlook A Index US cents/lb 5 195 A Index 15 95 NB Futures 5 Jul- Aug-3 Aug- Aug-5 Aug- Aug-7 Price Level vs.

2 Nearby Cotton Futures and Cotlook A Index US cents/lb A Index NB Futures 5 Jul- Aug-3 Aug- Aug-5 Aug- Aug-7 Price Level vs. Price Volatility: 1973/7 1/11 Volatility of A Index 1% 1/11 Average A Index vs. Volatility Measures by Seasons Relative Spread 1% 1/11 Coefficient of Variation 3% 1/11 % % % % % 1% % A Index in US cents/lb % A Index % A Index Volatility in Perspective Relative Spread of the A Index (%) Volatility in Perspective Relative Spread of the A Index (%)

Annual Average Volatility: 1 Annual Average Volatility: 19-9 All Raw Materials But Cotton Cotton Metals Food Beverages Energy Fundamental factors affecting cotton price volatility in 1 throughout the

3 Annual Average Volatility: 1 Annual Average Volatility: 19-9 All Raw Materials But Cotton Cotton Metals Food Beverages Energy Fundamental factors affecting cotton price volatility in 1 throughout the textile value chain -9 Unexpected surge in 1 Efforts to rebuild stocks Sustained record high prices Spinners close temporarily Trade restrictions Prices in 1/11 Unexpected surge (sellers) Speculation surges Collapse in mill use 1/11 (buyers) Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 Unexpected surge 1/11 Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 Unexpected surge 1/11 Aug-1 Nov-1 Feb-11 May-11 Aug-11 3

4 Prices in 1/11 Unexpected surge 1/11 Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 Unexpected surge Speculation surges 1/11 Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 Unexpected surge (sellers) Speculation surges 1/11 Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 Unexpected surge (sellers) Speculation surges Collapse in mill use 1/11 (buyers) Aug-1 Nov-1 Feb-11 May-11 Aug Prices in 1/11 A Iindex, US cents/lb Unexpected surge (sellers) Speculation surges Collapse in mill use 1/11 (buyers) Aug-1 Nov-1 Feb-11 May-11 Aug-11 Beginning Stocks /95 9/99 /3 /7 1/11

5 Production Southern Hemisphere Northern Hemisphere.9 9/95 9/99 /3 /7 1/ Cotton Supply = Beginning Stocks + Production Prod. Southern Hemisphere Prod. Northern Hem. Stocks /95 9/99 /3 /7 1/11 World Cotton Area Million Hectares 7 1/11: +1% /1 9/91 /1 1/11 Kg/ha World Average Yield (rainfed + irrigated) /1 9/91 /1 1/11 1% 75% 5% 5% Biotech cotton area (percentage of world total) % 95/9 /1 5/ 1/ / / CHINA INDIA Cotton Production USA BRAZIL PAKISTAN UZBEK. AUSTRALIA CFA Zone TURKEY 5

6 World Production and Mill Use 3 Mill Use 5 Production Mill Use 15 95/9 /1 5/ 1/ CHINA 9/1 1/ INDIA PAKISTAN TURKEY BRAZIL USA BANGLADESH World ending stocks and stocksto-use ratio Stocks-to-use ratio % % % % % 9/95 9/99 /3 /7 1/11 Other Factors Trade limits Government operated enterprises Speculation World Cotton Trade 1 95/9 /1 5/ 1/ Cotton Exports 3.1 9/1 1/ USA INDIA UZBEK. AUSTRALIA CFA Zone BRAZIL

7 Cotton Imports 3.. 9/1 1/ CHINA BANGLADESH TURKEY INDONESIA THAILAND VIETNAM Commercial and Speculative Traders Positions & NB Futures Thousand contracts US cents/lb 1 7 Speculators NB Futures Commercial Traders June- June-3 June- June-5 June- June Relative price of cotton to other fibers* *Weighted by shares in world end-use consumption 5 Market Share of Cotton in World Textile Fiber Consumption Percentage Average19-9 Outlook for 11/1: Significant Recovery in Stocks and Lower Cotton Prices

3 World Cotton Production Price Ratio 15 Price Ratios at Planting Time Cotton to Competing Crops 5 1 5 15 95/9 99/ 3/ 7/ 11/1 Maize Soy Wheat Rice 7 9 1 11 World Cotton Area World Cotton Area and

8 3 World Cotton Production Price Ratio 15 Price Ratios at Planting Time Cotton to Competing Crops /9 99/ 3/ 7/ 11/1 Maize Soy Wheat Rice World Cotton Area World Cotton Area and Yield Million Hectares 7 Kg/ha 1, Area Million Hectares /1: +% 35. Yield 3 1 1/ 91/9 1/ 11/1 1/ 3/ 5/ 7/ 9/1 11/1 World Co on Area and Prices Cotton Production % Change in Area (Year N) 15% 1% 11/ /11 11/1 5% % -5% % Change in A Index (Year N- 1) % -15% -5% % 5% 1% 15% CHINA INDIA USA PAKISTAN BRAZIL AUSTRALIA UZBEK. TURKEY CFA Zone

9 Growth in World Cotton Mill Use 15% 1% Market Share of Cotton in World Textile Fiber Consumption Percentage 5% % 5 Average % -1% -15% /1 /3 /5 /7 /9 1/ U.S. Cents per Pound Fiber Prices* Price Ratio: Cotton to Polyester* Cotlook A Index.5 China Cotton Index to China Polyester Prices China Polyester Aug-1 Oct-1 Dec-1 Feb-11 Apr-11 Jun-11 Aug Aug- Feb-9 Aug-9 Feb-1 Aug-1 Feb-11 Aug-11 *Weekly Quotes (Source: Cotton Outlook) *Cotton-equivalent polyester price index (Source: Cotton Outlook) Price Ratio: Cotton Yarn to Cotton Lint* Cotton & Yarn Indices Weekly Index* 5 Cotlook A Index Cotlook Yarn Index. Aug- Feb-9 Aug-9 Feb-1 Aug-1 Feb-11 Aug-11 *Ratio between Cotlook Yarn Index and Cotlook A Index 15 Aug-1 Oct-1 Dec-1 Feb-11 Apr-11 Jun-11 Aug-11 * August 5 = 1 9

10 Cotton Mill Use World Cotton Imports 1 1 CHINA INDIA PAKISTAN TURKEY 1/11 11/ BRAZIL BANGLADESH USA China World less China 1 95/9 97/9 99/ 1/ 3/ 5/ 7/ 9/1 11/1 USA INDIA AUSTRALIA BRAZIL UZBEK. CFA Zone Cotton Exports 11/1 1/ World Production & Mill Use Excess Consumption Excess Production TURKMEN /9 99/ 3/ 7/ 11/1 World Cotton Ending Stocks Cotlook A Index Stocks-to-Mill Use Ratio Outside of China 95/9 97/9 99/ 1/ 3/ 5/ 7/ 9/1 11/1.... Season-average (US cents/lb) /7 /1 5/ 9/91 95/9 /1 5/ 1/11? 1

11 Cotton Price Volatility in 11/1 Price volatility could decline: Expected recovery in global cotton stocks But price volatility could remain above average: Tight beginning stocks Uncertainty regarding global economic prospects Weaker cotton value chain Risk of higher government intervention in a period of lower prices Addressing Price Volatility 11

Textile Industry Challenges

6th Breakout Session: Textile Industry Challenges Dr. Christian Schindler Director General International Textile Manufacturers Federation (ITMF) ICAC Plenary Meeting 2013 October 3, 2013 14:00 to 15:30