China (Mainland), the largest cotton importer, is expected to receive 1.5 million tons this season, 41% less than in 2007/08, says ICAC. India and Uzbekistan, the second and third largest exporters, are expected to ship around 40% less cotton this season than last.

However, the largest exporter will be relatively less affected by the drop in demand -- the United States is expected to ship 2.6 million tons in 2008/09, or 12% less than last season, despite a sharp drop in production.

The ICAC Price Model 2007 is forecasting a 16% decline in the season-average Cotlook A Index in 2008/09, to 61 cents per pound, with a 95% confidence interval between 56 and 66 cents per pound.

ICAC sees world cotton area declining in 2009/10. "Declining cotton returns, more attractive prices for competing crops, and expected difficulties to finance production inputs are encouraging farmers to continue switching to alternative crops. World cotton production is expected to decrease by 1% to 23.4 million tons in 2009/10," says ICAC.