Cotton Price Forecasts Under Alternative Scenarios

The International Cotton Advisory Committee (ICAC) Secretariat has been forecasting season-average cotton prices since 1988. In 2007, after two seasons of unsatisfactory forecasting results, the Secretariat adopted a new econometric model, based on fundamental factors of the world cotton economy. The model uses four explanatory variables, which are themselves combinations of estimates and projections of stocks and mill use, trade, and judgment on whether Chinese trade is dominated by government actions or by private activity. Using its expanded price model, the ICAC Secretariat forecasts cotton prices for the 2014/15 season under alternative scenarios in this paper. These scenarios are a fast release of the Chinese reserve, a slow release of the Chinese reserve, and a slowdown in cotton demand.