Statement of the 48th Plenary Meeting
1. Based on information presented at its 48th Plenary Meeting, the International Cotton
Advisory Committee notes that world stocks and production of cotton are dropping
during the current season, leading to higher prices. The 1989/90 supply of cotton is
expected to total 113 million bales, 5 million bales fewer than last season.
2. The decline in world production this season is the combined result of poor weather in
some countries and low cotton prices relative to competing crop prices at the time of
planting. The rise in prices expected this season may lead to substantial increases in
production in 1990/91.
3. Forecasts for the world economy suggest that moderate growth will continue during
1989 and 1990, and cotton is expected to remain competitively priced relative to
chemical fibers. Textile fiber consumption is forecast to rise this season and next, and
cotton's market share may increase to almost 50 percent. World cotton consumption
maybe record high in 1989/90.
4. The tightening of stocks this season has led to a substantial rise in average cotton
prices. Even with a rise in production during 1990/91, the strong performance of world
cotton consumption expected in the next two yearn may keep cotton prices above the
average level of recent seasons.
5. The Committee heard reports on the very substantial value of cotton promotion
programs. It was noted that demand stimulation programs supported nationally by
producers in the United States and internationally by nine producing countries
benefitted all in the world cotton industry.
6. While there have been significant gains in cotton's share of fiber markets in this
decade in the United States, Europe and Japan, it was noted that the gains could be
reversed if the momentum for cotton was not maintained. The Committee looked with
concern at declining financial support for the programs of the International Institute for
Cotton and urged governments and international organizations to assist the IIC
continue its valuable programs.
7. Discussions were held on the volatility of cotton prices. The Committee heard a
report from its Secretariat on preliminary investigations into swings in international
cotton prices and the factors responsible for them. This report concluded that cotton
prices were neither more volatile nor less volatile than the prices of other primary
commodities.
8. The Committee heard reports from producers, consumers and traders of cotton on
the methods which they use to cope with price volatility. While use of futures and
options trading cannot totally protect participants in the market from the effects of price
fluctuations, these tools can reduce the risk of operating in the market.
9. The Committee also noted that some price variation is necessary to allocate
resources in an efficiently operating market. The Committee heard reports about the
difficulties resulting from governmental price interventions.
10. The Committee looks with interest to the final stages of negotiations under the
Uruguay Round of the GATT, in which it is hoped that the contracting parties can move
toward a trading system with fewer distortions and improved market access. Such
improvements in the world trading system would have especial benefits for low income
countries who depend on export earnings to finance their development.
11. The need for cooperative action to solve the quality problems of cotton was
recognized. Consuming countries called for continued efforts to reduce contamination
of cotton with foreign matter and increased efforts to solve the problem of stickiness.
12. A technical seminar was held on New Developments in Pest Control and their
Impact on Yield and Fiber Quality. Papers were delivered on the current state of
knowledge on chemical, biological and cultural controls of pests. It was decided to hold
next year's seminar on Cotton Production Research in a Farming Systems Perspective,
with Special Emphasis on Stickiness.
13. The Committee discussed the question of ICAC association with the Common Fund
and adopted the following resolution.
"Noting the role of the International Cotton Advisory Committee to suggest suitable and
practicable measures for the furtherance of international collaboration directed toward
developing and maintaining a sound world cotton economy,
"Noting the coming into effect of the Common Fund for Commodities and its
establishment in Amsterdam, and
"Noting that a majority of countries reconfirmed their governments' desire that ICAC
continue as t he international organization for cotton and expressed agreement in
principle that the ICAC should be regarded as the International Commodity Body which
is stipulated in the Common Fund Agreement,
"The Advisory Committee, in its 48th Plenary Meeting, instructs the Secretariat of the
Committee to contact and inquire of the Managing Director of the Common Fund
regarding the necessary steps for the Committee to establish its credentials as the
international commodity body for cotton as envisaged under the Agreement establishing
the Common Fund.
"The Advisory Committee further instructs the Standing Committee to consider the joint
requirements to share in the resources available under the Second Account of the
Common Fund and to make a decision on the nature of this relationship with the
Common Fund and any necessary measures in a timely fashion, before the distribution
of finances by the Governing Council of the Common Fund."
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