Industry analysts predict stability in cotton prices for 2012-13.
Cotton output in India is predicted by analysts to fall 5.4% for the year starting October. Resultantly, exports are also expected to crash by 45%. During 2011-12, exports were 12.7 million bales. For 2012-13, it is expected to be 7 million bales. As per the Cotton Advisory Board estimates, for the year 2012-13, 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
Scanty rainfall in the regions such as Gujarat, Maharashtra, Madhya Pradesh, and Karnataka has caused delay in sowing. India is experiencing poor rainfall to a tune of 20% due to which key cotton cultivating regions are facing dry conditions. Output from Andhra is expected to be 7.2 million bales, compared with 5.6 million during the previous year. This is optimistically expected to cover up for the decline of cotton production in Gujarat.
Approximately 65% of Indias cotton exports go to China. A sharp decline in the demand from China might be a reason for the fall in exports. China has already accumulated enough stock of cotton, due to which prices are expected to remain stable. As per Cotton Advisory Board estimates, China has accumulated approximately 42 lakh tons of cotton, up by 61% from 2010-11. Though China is predicted to reduce the cotton imports from India, the country is also expected to import cotton yarn. China is moving up the value chain rapidly, and hence would prefer buying cotton yarn from India rather than buying cotton, and spinning it into yarn.
Cotton prices 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 for Indian mill owners. Taking advantage of international prices, Indian mills are importing cotton at cheaper prices. Imports of cotton may touch 1.5 million bales. Cotton prices in India are expected to remain within a range of ` 34,000 per candy. If prices fall below ` 32, 000, the Government is likely to buy cotton, which would prevent prices from declining.
Cotton Balance sheet
- (Quantity in lakh bales of 170 kgs each)
- *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.
- Data source: cotcorp.gov.in