Last Updated : 12 April 2013 at 17:00 IST
Cotton exports from India are at a standstill and the estimated production for this season (Oct 2012-Sep 2013) is 35.1 million bales of 170 Kg each. Mumbai based Cotton Association of India (CAI) has recently estimated Indian’s production for this season. The total cotton supply during this season will be 41.9 million bales (170 Kg each). The domestic consumption will be 27.5 million bales. The surplus for this season will be 14.4 million bales.
But why the exports are not happening?
Simple! Indian cotton is expensive. Farmers are hoarding stocks in anticipation of prices to go up higher. And expensive cotton attracts least attention from importers.
“Merchants are not hoarding since money is involved in it. The prices may go up or down by 5% in the next three months” said a prominent player in Indian cotton industry. “Farmers are hoarding stocks. They anticipate the prices to go up further, but that may not be the case.” he added.
Farmers are bringing cotton to the mandis below than normal levels.
Meanwhile, China is also holding on to record cotton stocks.
“The Chinese bought cotton at higher prices. Now, if they sell it, they may incur losses.” the industry player said. Cotton prices in China are 40% higher than in India, the source noted.
He ruled out the possibility of India evoking a ban on cotton. “Cotton Corporation of India holds 1.25% of global cotton stocks. It would be disastrous if a cotton export ban is promulgated as prices in India would then come down. They will not do it.” the source said.
Next year, depending on weather, cotton prices may go up or down by 10%, he added. “The prices of corn and soybean have come down and farmers may consider switching to cotton.”
He also admitted that several players in Indian cotton front are stocking cotton in warehouses in China.
“There are around 5 lakh bales of Indian cotton in Chinese warehouses” he said. “If they (Chinese) want prompt deliveries, then cotton stocked in Chinese warehouses by ports could be sent to buyers thereby raking in an additional 2%-3% gains.” he said.
India follows its own system of cotton exports.
Exporters get a one-time permission to export 5000 tons of cotton. Once they export the said amount of cotton, they have to re-apply to sell another consignment of cotton.
The 2012/13 world cotton estimates by USDA show higher beginning and ending stocks and sharply higher trade.
“Beginning stocks are raised mainly in India due to adjustments to the 2010/11 and 2011/12 balance sheets. World production is forecast slightly lower as a reduction for Brazil is partially offset by the increase in the United States.” the WASDE report from USDA said.
“World consumption is raised slightly, as recent data indicate higher consumption for India and Vietnam. Forecast world trade is raised 1.8 million bales, including a 1.5-million-bale increase for China, based on reported allocations of additional import quotas to mills. Exports are raised for India, the United States, and Australia, but are lowered for Brazil and Mexico,” the report added.
Global 2012/13 ending stocks are estimated to touch 82.5 million bales, almost 1% higher than last month.
“China’s higher imports are expected to displace potential sales from the massive national reserve, raising stocks there to a projected 45.6 million bales. Stocks outside of China are projected 2 percent below last month.” the report noted.
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