Mumbai: Even as 2007-08 cotton crop is still being marketed around the world, market participants have begun to focus on likely developments in the next season. Clearly, in the fight for acreage, especially in the US, cotton is expected to lose out to an extent. But any loss in the US could be made up by increases in other origins. Weather would, of course, play a crucial role in shaping yields.
China
Global growth prospects and, more importantly, growth in major Asian economies such as China and India, are likely to continue to boost cotton consumption demand. As the mover and shaker of the world cotton market, China will continue to play a major role in the world cotton price dynamics. The country is the world’s largest producer, importer and consumer of the natural fibre. On current reckoning, world cotton area in 2008-09 may remain unchanged from the previous year, total output could rise because of better yields, but still trail total consumption. This would mean a further drawdown of stocks, with implication for world cotton prices.
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For 2008-09, the Washington-based International Cotton Advisory Committee (ICAC) has forecast world cotton area to remain largely unchanged at 34 million hectares; but production is forecast to rise by five per cent to 26.9 million tonnes due to expected increase in yield. On the other hand, global cotton mill use is projected at 27.5 mt in 2008-09. Although it is only one per cent higher than in the previous year, consumption would exceed production, resulting in a further decline in ending stocks to 10.7 mt. An expected significant decline in the stock-to-mill use ratio in the world-less-China is pushing prices higher, the agency pointed out. Using its price model, the ICAC secretariat has forecast a season-average Cotlook-A Index of 67 cents per pound in the current year 2007-08, some 8 cents higher than in the previous year.
India
No wonder, rising world cotton prices and keen demand help India further consolidate its position as a major supplier of cotton to the world market. This has been made possible because of a sharp expansion in domestic production (over 300 lakh bales, up 10 per cent from 2006-07) that has been able to leave a decent export surplus. Despite appreciating rupee, Indian cotton exports are seen performing well because of price parity. It is estimated that about 30 lakh bales have already been shipped out and an equal number will be moved out over the coming weeks. Indeed, exports have helped provide excellent price support in the face of large production. Cotton rates continue to remain firm. Shankar-6 is currently traded at Rs 21,000 a candy and Bunny at about Rs 19,900. The market is up five per cent in the last 3-4 weeks.
There is unlikely to be any major softening of prices anytime soon. Having waited for arrival pressure to build (so that prices may move lower) mills seem to be losing out as the market shows no signs of a reversal. Till end-December about 140 lakh bales were estimated to have arrived at the marketing yards and a further 100 lakh bales expected in January and February, after which arrivals will taper-off.
One of the traders made a perceptive observation that local cotton sales to exporters was brisk because payment against goods supplied was prompt, unlike in case of supply to mills. The export market has not been so benign for long years; there is, therefore, belief that India should reap the maximum benefit from it. The next season too looks favourable for India and Indian cotton growers.
China
Global growth prospects and, more importantly, growth in major Asian economies such as China and India, are likely to continue to boost cotton consumption demand. As the mover and shaker of the world cotton market, China will continue to play a major role in the world cotton price dynamics. The country is the world’s largest producer, importer and consumer of the natural fibre. On current reckoning, world cotton area in 2008-09 may remain unchanged from the previous year, total output could rise because of better yields, but still trail total consumption. This would mean a further drawdown of stocks, with implication for world cotton prices.
• Check out our Yearender Special
For 2008-09, the Washington-based International Cotton Advisory Committee (ICAC) has forecast world cotton area to remain largely unchanged at 34 million hectares; but production is forecast to rise by five per cent to 26.9 million tonnes due to expected increase in yield. On the other hand, global cotton mill use is projected at 27.5 mt in 2008-09. Although it is only one per cent higher than in the previous year, consumption would exceed production, resulting in a further decline in ending stocks to 10.7 mt. An expected significant decline in the stock-to-mill use ratio in the world-less-China is pushing prices higher, the agency pointed out. Using its price model, the ICAC secretariat has forecast a season-average Cotlook-A Index of 67 cents per pound in the current year 2007-08, some 8 cents higher than in the previous year.
India
No wonder, rising world cotton prices and keen demand help India further consolidate its position as a major supplier of cotton to the world market. This has been made possible because of a sharp expansion in domestic production (over 300 lakh bales, up 10 per cent from 2006-07) that has been able to leave a decent export surplus. Despite appreciating rupee, Indian cotton exports are seen performing well because of price parity. It is estimated that about 30 lakh bales have already been shipped out and an equal number will be moved out over the coming weeks. Indeed, exports have helped provide excellent price support in the face of large production. Cotton rates continue to remain firm. Shankar-6 is currently traded at Rs 21,000 a candy and Bunny at about Rs 19,900. The market is up five per cent in the last 3-4 weeks.
There is unlikely to be any major softening of prices anytime soon. Having waited for arrival pressure to build (so that prices may move lower) mills seem to be losing out as the market shows no signs of a reversal. Till end-December about 140 lakh bales were estimated to have arrived at the marketing yards and a further 100 lakh bales expected in January and February, after which arrivals will taper-off.
One of the traders made a perceptive observation that local cotton sales to exporters was brisk because payment against goods supplied was prompt, unlike in case of supply to mills. The export market has not been so benign for long years; there is, therefore, belief that India should reap the maximum benefit from it. The next season too looks favourable for India and Indian cotton growers.
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