The International Cotton Advisory Committee is projecting world cotton production will fall 5 percent to 103 million bales in the 2009-10 marketing year; potentially sending cotton prices 9 percent higher.

The second straight yearly decline in global production will be driven by China, where the cotton crop is expected to fall to 31 million bales or 16 percent less than last season. On the other side, cotton output in India is projected to increase to a record of 24 million bales, up 8 percent from last year.

Cotton production in the Southern Hemisphere is expected to rise by 4 percent to 9.6 million bales in 2009/10, driven by Australia and Argentina. The ICAC’s secretariat says production in Brazil could decline slightly.

“World cotton mill use is expected to recover by 2 percent to 108 million bales in 2009-10, driven by the global economic rebound,” the secretariat said. “Asia is expected to be the main engine of growth in cotton spinning this season, with a projected increase in cotton consumption of 2.8 million bales to 84 million bales, accounting for 77 percent of global cotton mill use.”

World cotton imports are forecast to rise by 8 percent to 32 million bales in 2009-10. The secretariat expects Chinese imports to increase by 18 percent to 8.2 million bales, but their eventual size will depend on government decisions regarding import quotas and reserve management.

Exports from India could rebound to 6.4 million bales, driven by a large exportable surplus. Exports from Uzbekistan and Australia are also expected to expand, whereas U.S. exports could decrease by 18 percent to 11 million bales.

Based on an expected lower stocks-to-mill use ratio in the World-less-China in 2009-10, the ICAC Price Model forecasts a season-average Cotlook A Index of 67 U.S. cents per pound in 2009/10 (the 95 percent confidence interval is between 59 and 76 cents per pound), resulting in a 9 percent increase from the 2008/09 average.