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Current Scenario Worldwide
- The worlds total cotton production is in the range of 113.6 million of 480 lb bales.
- China and USA produce 23 percent and 21 percent respectively of the total production
- India produces around 16 percent (18.3 million of 480 lb bales) of the worlds total cotton production.
- India consumes approximately 14 percent (16.5 million of 480 lb bales) of the worlds total cotton produce
Q. What are the reasons for this abrupt increase in cotton prices across the world? Please explain?
Ans. Mr. Srinivas Kodali (ED, Priyadarshini Spinning Mills) replied that there could be several reasons. There is speculative buying in the futures by commodity hedge funds. Prices are therefore based on speculation instead of actual supply and demand. Also there is holding by traders in anticipation of further increase. Mr. Manoj Kumar Tiberwal of Gangotri Textiles also commented on future trading and speculative hoarding supported by big funds to be the reason for steep increase in price. Mr. V.B. Sutaria (Director Marketing, NTC) assisted with his comments on unstable political situation in Pakistan leading to an imbalance in cotton trade. Pakistan itself is importing cotton yarn, even though the country being a large producer of cotton crop.
Q. What are the measures taken by your company in order to compete with increase in prices?
Ans. Some of the well organized mills like Priyadarshini spinning mills have taken up ginning activity. Mr. Kodali commented that they have procured cotton quantity at lower prices and ginned for future consumption. Because of rapid rise in prices, they have not procured sufficient quantity to last the whole year and are planning to have a staggered purchase. Making value added product like Lycra was a suggestion given by Mr. Tiberwal in order to cope up with the increased prices in world market. N.T.C. Being a Government organization (P.S.U) is buying a large quantum of cotton from C.C.I. (Cotton Corporation of India, Which is again a leading P.S.U.) commented Mr. Sutaria.
Q. How do you foresee the demand supply situation for cotton in coming years? Why?
Ans. Experts opine that situation will be tight as lot acreage is being diverted for biofuels. Mr. Srinivas commented that as long as the oil stays above $100 per barrel, this situation will persist.
Mr. Manoj Tiberwal had a view that demand supply will automatic match if prices go up beyond a point as consumption will drop and alternate fibre like polyester and viscose consumption will increase. Demand of textiles is elastic. With increase in prices-people defer the consumption or go for low cost options.
Mr. Sutaria told fibre2fashion that the demand & supply is totally unpredictable. Being a natural fibre, if monsoon is poor then case crop will get affected, however the demand anticipated for cotton fibre through out the world will be good.
Q. What according to you are the measures to be taken in order to cope up with the situation?
Ans. Mr. Srinivas pointed out that significant amount of cotton has been exported as freight cost to China is very cheap. He also showed his concern by giving an example of cheaper logistics cost for sending Gujarat cotton to China than to Hyderabad. Government needs to take some rigid steps in order to cope up with situation.
Control over exports could be one of the measures as suggested by Mr. Manoj Tiberwal. Export should be permitted a fixed quantity after ensuring domestic availability. Export should be done thru CCI or Maharashtra federation only, he added.
Government should restrict the Export of Raw Cotton fibre to protect cotton Textile Industries and ease out import duty on raw cotton, commented Mr. Sutaria
Q. Shortage in food is an acute problem highlighted in coming years? Do you think it will affect the cotton production worldwide? What should be remedy?
Ans. Cotton production is more effected by the demand for biofuels than the food requirements of the population as per view of Mr. Srinivas. However Mr. Tiberwal suggested increasing more BT cotton production in India. Mr. Sutaria showed his concern for the shift in usage of synthetic fibres as well as other natural fibres instead of cotton as a cheaper option, as food is the first priority for people across the globe. This will adversely affect the cotton textile industry.
Conclusion:
From the survey conducted by a team of Fibre2Fashion, analysts could make out some of the challenges that are lying ahead of cotton textiles industry like shift of world focus from cotton to other natural fibres, environmental effects on reduction in acreage for production of cotton. Market speculations could lead to a huge mismatch in demand supply that will make it beyond reach of small and medium entrepreneurs to compete in international market. Energy and power is also some of the major challenges for developing economies like India. Crude prices are increasing and so is the energy cost. The probable partial substitute to fuel could be biofuel. Government need to take steps to priorities the requirements for national progress. Reduction in Import duty and control over exports could be the probable solution as suggested by industry experts.
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