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President and BU Leader Cargill Cotton
What are the challenges facing production of organic cotton?
Though the demand for organic cotton is growing, one cannot say the same about its production. This is because there are no consistent global standards to produce organic cotton. In addition to this, the cost of production becomes much higher. Typically the chain passes on the premium to the consumer, which makes it a niche product, and therefore limits its use in the fibre mix. Another issue concerning organic cotton is its credibility. It is difficult to test whether an item is genuinely organic or not, irrespective of what the label on the goods may state.
World cotton prices are predicted to fall in 2015, and consumption is expected to go up. Can we expect cotton consumption to grow as much as synthetic fibres on a global level?
Change in fibre mix is not only about price, it is about trend and fashion. Today's youth is largely indifferent to the fibre mix as long as the cloth looks and breathes fine. We are in a period of oversupply with less government intervention; so prices should be largely stable and low. This will help in the recovery of cotton consumption, but it has to be more than a year to trend. Cotton's loss, because of price and volatility, can be arrested. After five years, we are going in to a year when consumption outstrips production. But it will take a long time to reverse the trend. So while cotton will grow in absolute numbers, it may not outpace synthetic fibre growth.
What is the consumption of cotton in India, and how are the prices behaving in India as compared to other parts of the world?
Indian consumption is growing, and USDA, for this marketing year, estimates it to be at 25.75 million bales. India for the last decade or so has been a surplus producer. Indian cotton has generally remained the cheapest high-grade cotton, and domestic mills have catalysed this to help grow the domestic consumption. However, there have been times when export bans, import duties and a higher farmer-support-price have led India to become a high-priced island. We are entering another such year when Indian prices are higher relative to world prices.
What are the biggest challenges for the cotton industry in India?
The biggest challenges that the cotton industry in India faces are as follows.
First and foremost is the quality of cotton. Indian cotton despite being intrinsically of good quality is handled very poorly from the farm to mills. The world discounts the Indian bale for this reason, and the domestic industry is compelled to use a raw material delivered sub-standard.
Another problem is the myriad taxes because of which India competes within itself more than the rest of the world. It costs more for cotton to move from Gujarat to Coimbatore than to China.
Even though the raw material is available, a lot of the factories still run on obsolete machinery, which makes it difficult for the Indian cotton industry to compete with countries such as China.
Erratic power supply further adds to this problem. Power is a major component of the cost. Interruption not only hampers productivity, but running generators adds to the cost.
A large portion of the consumption growth has been fuelled by China's demand for yarn. As China unwinds its cotton stockpiling programme, demand for yarn is expected to fall. Unless this surplus is consumed locally or placed elsewhere, it will affect the margins.
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