The Hindu Business Line : Global cotton production may dip a tad

Mumbai May 8 A slight dip in global cotton production, a 2 per cent increase in global consumption, lower ending stocks and a large increase in China's imports are likely to be the defining features of the 2007-08 cotton season.

This development will obviously impact world cotton prices. A strong upside risk to prices is indicated. The Cotlook A-Index is forecast to rise to season-average of 62 cents a pound next year, up from current year (9-month) average of 58 cents, according to the International Cotton Advisory Committee (ICAC).

China's imports are projected to rise by one million tonnes (mt) to 3.9 mt in 2007-08, which could drive international trade by 9 per cent to 9.1 mt, the Washington-based agency said recently.

Production, consumption

For 2007-08, world production is forecast at 25.1 mt (25.3 mt), while consumption is set to rise to 26.7 mt (26.1 mt). Together, China, India and Pakistan are expected to account for more than two-thirds of world cotton mill use, the ICAC pointed out.

The global developments in terms of demand-supply fundamentals and prices are sure to benefit India. The only concern is the rising rupee. In the new season, if the currency holds at the present levels, local prices may have to adjust downward to create export parity.

There is hope, subject of course to normal monsoon, that the country would produce 260-270 lakh bales of cotton (or even more) and leave 40-50 lakh bales as export surplus. Area under Bt cottonseed is expected to expand further.

Market arrivals for the 2006-07 season have reached around 253 lakh bales as at end-April, while export shipments are estimated at 40-41 lakh bales.

Stronger rupee seems to have put paid to hope of further exports; but is seen encouraging imports.

Indeed, cotton imports have begun. Already 2 lakh bales have arrived, mostly from Egypt and the US. Three lakh bales are said to be in transit. Over the next four months, southwest monsoon will play a critical role in shaping kharif crops including cotton.