Industry analysts predict stability in cotton prices for 2012-13.


Cottonoutput in India is predicted by analysts to fall 5.4% for the year startingOctober. Resultantly, exports are also expected to crash by 45%. During2011-12, exports were 12.7 million bales. For 2012-13, it is expected to be 7million bales. As per the Cotton Advisory Board estimates, for the year2012-13, India is expected to harvest 33.4 million bales of 170 kgs each.


Production in lakh bales/Yield kgs per hectare


  • As per CAB dated 4th October 2012
  • Projected


Scantyrainfall in the regions such as Gujarat, Maharashtra, Madhya Pradesh, andKarnataka has caused delay in sowing. India is experiencing poor rainfall to atune of 20% due to which key cotton cultivating regions are facing dryconditions. Output from Andhra is expected to be 7.2 million bales, comparedwith 5.6 million during the previous year. This is optimistically expected tocover up for the decline of cotton production in Gujarat.


Approximately65% of Indias cotton exports go to China. A sharp decline in the demand fromChina might be a reason for the fall in exports. China has already accumulatedenough stock of cotton, due to which prices are expected to remain stable. Asper Cotton Advisory Board estimates, China has accumulated approximately 42lakh tons of cotton, up by 61% from 2010-11. Though China is predicted toreduce the cotton imports from India, the country is also expected to importcotton yarn. China is moving up the value chain rapidly, and hence would preferbuying cotton yarn from India rather than buying cotton, and spinning it intoyarn.


Cottonprices in India are higher compared with the rest of the world. It is 4-5%higher than the imported varieties, making imports an attractive option forIndian mill owners. Taking advantage of international prices, Indian mills areimporting cotton at cheaper prices. Imports of cotton may touch 1.5 millionbales. Cotton prices in India are expected to remain within a range of ` 34,000per candy. If prices fall below `32, 000, the Government is likely tobuy cotton, which would prevent prices from declining.

Cotton Balance sheet



  • (Quantity in lakh bales of 170 kgs each)
  • P-Provisional
  • *As estimated by CAB in its meeting held on 04-10-12


Consumption of cotton by mills and non-mills are expected to be higher for the current year comparatively over the previous year. During the previous year, due to financial losses, many mills took fewer orders. International Cotton Advisory Committee estimates that mill use is expected to increase to 14.9 million tons.


If cotton prices remain stable and at lower level, possibilities exist that spinning industry might recover from its losses. The entire textile value chain depends on the cotton prices. Industry players hope that softening cotton prices will have a positive effect on the Indian textile industry, helping it to recover from the debt burden. Indian spinning industry is expecting a buoyant business.


References:

  1. Business-standard.com
  2. Indiainfoline.com
  3. Data source: cotcorp.gov.in