The Hindu Business Line : Cotton outlook bright, exports apace

Mumbai, Nov 4 Even as the 2007-08 season is underway and the trade outlook is favourable to producers, cotton market participants have begun to examine the prospects for next year, that is 2008-09, planting for which would commence in April/May 2008.

ICAC report

According to preliminary projections of the Washington-based International Cotton Advisory Committee (ICAC), world cotton production may reach a new-high of 27.1 million tonnes next year, while consumption would be 27.8 mt, resulting in a further drawdown of stocks to 10.6 mt. World exports would be down to 8.7 mt (9.1 mt). The market conditions in the current season (2007-08) are becoming increasingly clear. Following smaller acreage planted to cotton (especially in the US), world output is expected to decline by two per cent to 26.1 mt. World mill consumption is forecast up by three per cent to 27.5 mt. This will result in a decline in ending stocks by 11 per cent to 11.4 mt.

Exports forecast

World cotton exports are forecast up by 10 per cent to 9.1 mt in 2007-08 (8.2 mt) primarily because of an anticipated rebound in Chinese imports to 3.5 mt. Exports from the US, India and Brazil are expected to rise significantly. The ICAC secretariat has forecast a season-average Cotlook A-Index of 69 cents a pound in 2007-08 (up about 10 cents from last year). The projected price increase is the result of an expected significant decrease in the stocks-to-mill use ratio in the World-less-China in 2007-08.

Bright for India

Meanwhile following robust looking crop conditions in India (estimated crop size 300-310 lakh bales) and arrivals picking up considerable momentum in the last few days, export prospects have considerably brightened.

Already close to 20 lakh bales have been committed for export mainly to Pakistan, Indonesia and China. Talking to Business Line about export prospects for the whole season, Mr Shirish Shah of Bhaidas Cursondas & Co, one of country’s oldest firms in cotton business, said up to 60 lakh bales export may be possible.

Currently, exporters, mills and ginners are buying and the market rates have remained firm because arrivals are readily mopped up.

Prices are expected to correct down after November when arrivals peak and supply pressure builds up considerably.

According to Mr Shah, October arrivals totalled 28 lakh bales.

He expects arrivals of 55 lakh bales in November and 65 lakh bales in December and another 60 lakh bales in January, after which they would gradually taper down.

Daily arrivals are currently an estimated 1.5 lakh bales, of which Gujarat accounts for 50,000 bales followed by Maharashtra 40,000 bales, North India 25,000 bales and Madhya Pradesh 20,000 bales.

At current firm market prices (for instance, Shankar-6 is quoted at Rs 20,000 a candy) cotton growers should be happy. Exports are likely to keep the mood buoyant for at least a few weeks.

Mills will probably come into the market on a large scale once the market begins to show signs of softening.

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