Behind the softening of Cotton exports from India

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. 

As published here: http://www.commodityonline.com/news/behind-the-softening-of-cotton-exports-from-india-53881-3-53882.html

Cotton politics in China: Why it is not good for Cotton

Last Updated : 02 November 2012 at 15:10 IST

Politics in a broad sense is not the least beneficial on any front. Nothing could be farther from the truth in case of cotton politics too.

Chinese government is procuring many million tons of cotton from farmers—5 million tons to be precise—and according to analysts, would cover cotton deficit of the nation for six years when added to the existing piles of 4 million metric tons.

Storage issues apart, China, one of the biggest consumers of cotton, would thus prevent any chance of competitive cotton entering its territtory through this massive hoarding exercises.

USDA says that China would import 11 million bales of cotton, down 55 percent from last year, as its inventories jump.

This invariably is a pre-emptive strike by the Chinese government. The cotton sector there employs hundreds of thousands of farmers and if they are to lose their livelihoods to surplus cotton production, that would set the cotton piles on fire, in other words, would politically cripple China as agitations begin.

It is no secret that China outspends its defence budget to maintain internal security and order.

The massive purchase of cotton has significance especially in an era of leadership transition in China where Xi Jinping is expected to takeover the Presidency of the nation from Hu Jintao. Smooth transitions are a sure way to consolidate power as far as the Party leadership is concerned and in an ambience of political instability could literally threaten the very thrones of centralised governance.

“As long as China maintains this regime to subsidize cotton farmers, the world will be prone to overproduction,” Joe Nicosia head of Allenberg Cotton Co said to Bloomberg News. “Can you imagine a world without China importing any cotton for six years? They hold all the cards.”

Cotton has dipped 68% from record highs in 2011 as farmers across the globe increased production in anticipation of higher profits.

“Outside of China the world has 13.9 million bales of surplus,” said Nicosia, who is also executive vice president of Louis Dreyfus Commodities BV. “How much of this surplus China decides to absorb will determine the cotton market’s direction.” he said to Bloomberg.

Add to this, the production and consumption of man-made fibers and the clear picture emerges. Cotton may well lose its price battle.

As published in: http://www.commodityonline.com/news/cotton-politics-in-china-why-it-is-not-good-for-cotton-51161-3-51162.html

Will India turn into a cotton importer?

Last Updated : 12 July 2011 at 14:25 IST
NEW DELHI (Commodity Online): India may turn into an importer of Cotton if the domestic textile industry grows by 15-20% a year until the current capacity doubles, says B.K.Mishra, Managing Director Cotton Corporation of India. However he ruled out the possibility of the same happening over a year or two.

Mechanisation of farm holdings in India and employing machines to pick cotton is not feasible as most holdings are small and owned by individual farmers who may not have the sufficient financial muscle to bring in machines, added Mishra. R.C. Jain, Chairman and Managing Director of TT Limited--an integrated textile company--concurs Mishra’s view, but disagrees that India may turn into an importer.

Textiles also include polyesters and there is a shift from cotton to polyesters by customers, R.C. Jain says.

“Besides, cotton acreage and productivity is also increasing.” he argues.

As per the Ministry of Agriculture, cotton has been sown on 21.65 lakh hectares of land as on June 17 as compared to 15.42 lakh hectares last year.

But cotton supply scenario in India is already constrained.

Cotton Advisory Board expects the closing stock to be 27.5 lakh bales by the end of current season which will last only for a little over a month given the average monthly consumption of 22 lakh bales by textile mills in India. Cotton year runs from October to September in India with arrivals beginning only in January.

Cotton Corporation of India (CCI) reported 30.2 million bales of cotton arrival as of June 19th, 2011 amounting to mere 4% increase over the last year.

For 2009-10, India’s cotton consumption stood at 230 lakh bales which increased to 258 lakh bales in 2010-11.

“The domestic textile industry is one of the largest industries in the country and has witnessed a phenomenal growth in the last two decades in terms of installed spindlage and yarn production. The significant features of this growth include installation of open-end rotors and setting up of export-oriented units. The mushroom growth of spinning industry and its modernization has led to sustained growth in cotton consumption specially during the years when country harvested good crop production.” says Cotton Corporation of India website.

After achieving a sustained growth in cotton consumption during Xth Plan period, domestic cotton consumption in last few years barring 2008-09 has been increasing steadily.

As published in: http://www.commodityonline.com/news/Will-India-turn-into-a-cotton-importer-40690-3-1.html