The Hindu Business Line : Bumper yield buoys cotton export prospects

Despite a decelerated performance by cotton textile industry in the past two quarters, yet another bumper cotton production projected for the ensuing 2007-08 season has raised interests on how this commodity will behave price-wise over the next two months.

Surplus cotton

The good news is that the country will have surplus cotton this year.

The last week’s Cotton Advisory Board meet has put the 2007-08 crop estimation at 300 lakh bales plus. The domestic cotton trade has pitched for even higher crop size of 312-325 lakh bales.

CCI estimation

Cotton Corporation of India (CCI) in a State-wise crop estimation has put its initial crop estimation for 2007-08 at 310-312 lakh bales.

The CCI crop data point to a five per cent crop area rise at 95 lakh acres from last year’s 91 lakh acres giving six per cent increase in production.

‘The higher cotton output anticipated for 2007-08 season gives out the indication that the domestic prices will not be high and at the same time, it will enable the country to export more cotton ’, feels Mr Subash C. Grover, CCI Chairman and Managing Director.

As against 55 lakh bales export in 2006-07, according to Mr Grover, it would be in the order of 60 lakh bales or even more in the new season.

Whereas the private trade estimates the exports in the new season to be as high as 70 lakh bales going by the current enquiries.

CCI which exported 1.60 lakh bales in 2006-07 is expected to double its export this year.

Already 5/6 lakh bales of cotton of 2007-08 crop had been committed for December 2007 shipment at Rs 19,500-19,800.

Shipments

Bulk of cotton export last year was for China, followed by Bangladesh, Pakistan and for the other S-E Asian countries.

This year too, the shipment to China would dominate total cotton export.

The cotton export projection coupled with the paling price parity between international cotton and India (67-69 cents per pound at New York Futures and the Rs 19,500-20,000 per candy price quote in domestic market) has, however, unnerved the domestic spinners, most of whom are already facing severe liquidity crunch in yarn market. ‘We expect huge cotton export this year as there has been a strong demand for cottons (that goes for 20s-40s count yarn especially) produced from Gujarat and these varieties are specially preferred by China and Pakistan.

‘So, good quality cotton available at the beginning of the season will move out of India’, feels Mr P.V. Chandran, Managing Director, Ambica Cotton Mills Ltd.

He held that in the absence of the country lacking strategy in retaining quality cotton, domestic mills having weak finances would be hit.

Cost-competitive

Improved port logistic between India and China has rendered freight for raw cotton to China cost-competitive, according to Mr Viswanathan, Secretary of South India Cotton Association, and a shipper can move one cotton container of 165 bales at a freight of $200-250, whereas within India, the cost of transporting 100 bales from North to a unit in South India by road would be anything from Rs 37,000 to Rs 42,000.

This and the increased recognition in international market of India’s cotton being free of contamination has led India turning into a net cotton exporter.

Rupee value

Though the weakening rupee against dollar as seen in recent days would enable mills recover export trade and reduce losses , the cotton trade feel it might hurt the spinners in terms of their raw material sourcing because of the competitive bidding from cotton export trade, said Mr Ashok Daga, President of Coimbatore Cotton Association.

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