World cotton production in 2016-17 is likely to rise by eight per cent and world consumption is likely to remain stable, which may put pressure on prices in the latter half of the season. World ending stocks may fall by seven per cent in 2016-17, though stocks outside of China are expected to grow by six per cent. The current season began with lower stocks, particularly from countries in the southern hemisphere, which saw ending stocks in 2015-16 fall by 21 per cent, the lowest since 2009-10.

The shortage in supply carried through the first few months of the 2016-17 season thereby keeping prices firm. India’s cotton production is expected to increase by four per cent, making it the world’s largest producer. Polyester prices have shown an uptrend, but still well below international cotton prices, making it unlikely that cotton mill use will expand unless polyester prices continue to rise. Gujarat is one of the key producers of cotton in India.

Mill use of cotton in India is projected to decline by one per cent. Traders cited reduced arrivals and cash shortage in banks as the reason for the rally in cotton prices, whereas most believe that the rally may not continue longer on good production.