As New York December cotton futures continue to bounce around the dollar per pound mark, growers are getting another lesson in the old axiom that the cure for low prices is, well, low prices.

The Cotton Outlook A Index reached $1.16 cents per pound on Sept. 29, a figure that is 80 percent higher than on the same date in 2009 and the highest value since May 23, 1995, according to the International Cotton Advisory Committee.

The ICAC, an organization representing the world’s cotton producing and consuming countries, said the firm increase in cotton prices is mainly the result of strong market fundamentals rather than speculation; i.e., low prices finally drove enough people out of cotton that the market doesn’t have all it needs.

“World cotton stocks fell by 24 percent to 9 million tons or 41 million bales in 2009-10,” the ICAC Secretariat said in its monthly outlook report. “This marked the end of a five-year period of high stocks” which helped keep prices low.

Contributing to the low prices was the worldwide recession, which resulted in a sharp drop in demand for textile products.

ICAC analysts said they expect world cotton production to rebound by 16 percent to 25 million tons or 115 million bales in 2010-11 encouraged by the significant rise in prices that has occurred since April 2009.

“Global cotton mill use should continue to recover, however more slowly than in 2009-10 due to limited available supplies and high prices of the fiber,” they said. “As production and consumption are forecast to roughly balance in 2010-11, world ending stocks are not expected to increase significantly.

“These perspectives, added to concerns about the damage caused to Pakistan’s 2010-11 cotton crop by the August floods, expected harvest delays in China and India, and concerns about restrictions in shipments by a major exporting country, have supported cotton prices in the first two months of 2010/11.”

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The ICAC Price Model forecasts a 2010-11 season-average Cotton Outlook A Index of 90 cents per pound, 15 percent higher than last season and the highest since 1994/95. The 95 percent confidence interval extends from 78 to 106 cents per pound. This forecast suggests that cotton prices could decline from the current highs later in the season. However, external factors such as the uncertain global economic outlook, possible government measures affecting global cotton trade, and price competition with other fibers could affect the degree of increase in prices in 2010-11.