Cotton prices declined in late 2004 as a result of record output in the major cotton-producing countries (Brazil, China, India, Pakistan and the United States – which together account for more than 70 percent of world production). World cotton prices were recovering in the first three months of 2005, mostly due to expectations of lower production in 2005/06 following reduced plantings in response to low prices at sowing time.
As overproduction lowered cotton prices last year, there was less incentive to produce cotton this year meaning fewer supplies. While subsidized cotton production in the US is of benefit to manufacturers (and consequently consumers) reducing or eliminating cotton subsidies improves the economic situation of lesser developed countries dependent upon commodity production. Further proposals for eliminating subsidies will be hotly debated at the WTO meeting next week in Hong Kong. In short, expect the price of cotton fabrics to rise next year.