The Hindu Business Line : Global cotton may gain more than expected

Mumbai, Aug. 3 The cotton scenario is turning rosier than anticipated, especially for India – in terms of production prospects and export opportunities. World cotton prices next season may rise higher than forecast earlier.

The Washington-based International Cotton Advisory Committee (ICAC) has forecast a higher season-average cotton price for 2007-08.

Sharp rise

The new model developed by ICAC secretariat forecasts a season-average Cotlook A-Index of 71 cents a pound next season. This represents a sharp increase from the 2006-07 season average price of 59 cents, and is the result of an expected significant decrease in the ratio of stocks to mill use in the world-less- China in 2007-08.

While world production is forecast slightly down at 25.1 million tonnes (mt) next year, consumption is set to continue to expand by 2 per cent to 26.9 mt.

With output trailing consumption (by 1.8 mt) during the year, stock drawdown is inevitable. World ending stocks are forecast down by 14 per cent to 10.4 mt.

World cotton trade is expected to rebound to 9 mt, driven by larger Chinese imports. According to ICAC, exports by the US, Uzbekistan and Brazil are expected to increase, but exports by India may remain stable.

Projected increase in production in India, Pakistan and China may be more than offset by an expected fall in the US, the agency pointed out adding that India’s production is placed tentatively at 5 mt, making it the second largest producer.

Asia would account for 58 per cent of world cotton production and 75 per cent of world cotton mill use in 2007-08.

Crop conditions

Meanwhile, crop conditions in India are favourable. On current reckoning, and subject to normal weather, the country can hope to produce about 30 million bales (170 kg) of cotton, up about 10 per cent from 2006-07 crop of 27.2 million bales.

The global price outlook for cotton as predicted by ICAC is likely to provide a shot in the arm for export of Indian cotton. About five million bales of export surplus may be available.

Even though the rupee is ruling firm, a further upside looks limited. Domestic prices will obviously adjust to international parity.

In all likelihood, 2007-08 will prove to be a year of remunerative prices for cotton growers and large exports. Close attention to logistics will be helpful.