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48th Plenary Meeting, Scottsdale, Arizona, United States

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."