World cotton area is projected to rise by 7% in 2011/12 to 36 million hectares, the largest in 17 years, in response to record prices in 2010/11. Farmers are expected to expand cotton area in 2011/12 in all producing countries. World cotton production is projected to increase by 9% to a record exceeding 27 million tons.

Rising cotton supplies will feed rising demand in 2011/12. However, although prices are expected to decline from current record levels, it is likely that prices will stay substantially higher than the average of 60 cents per pound that prevailed during the past decade. Higher prices, and competition from chemical fibers, are expected to limit growth in mill use during 2011/12 to 3% to 25.4 million tons. The largest increases in mill use are projected for India, China, Pakistan and Turkey.

World cotton prices reached new records during February 2011. A limited supply, robust demand and depreciation of U.S dollar may have caused the surge in prices. The very scarce uncommitted supply as of 2011 may provide strong pressure on prices and cause increased volatility through the rest of the season. The Cotlook A Index reached a record of 233.5 cents per pound on February 18, 2011 and averaged 147 cents per pound during the first seven months of 2010/11 (77.5 cents per pound during 2009/10). The New York futures contract for March 2011 delivery rose from 77 cents per pound on August 2, 2010 to a record of 205 cents per pound on February 28, 2011.

In the current environment of volatility, the ICAC price model is less relevant than in other seasons. The

Secretariat season-average projection for the 2010/11 Cotlook A Index is 161 cents per pound. The projection is not based on the ICAC price model, but on the average price for the first seven months of the season and our judgment that during the rest of the season prices will remain close to the average recorded during the beginning of 2011.

WORLD COTTON SUPPLY AND DISTRIBUTION

An Aljazeera TV report on the textile industry of China