The Hindu Business Line : Robust performance in cotton may continue

India’s robust performance in cotton – rising output, expanding exports and remunerative grower prices – during the last two years is set to continue into 2008-09 season as well.

Going by the current indications, the world’s second largest cotton producer is not only in a position to register another bumper crop, but would also be able to effect exports on a large-scale in view of the expected high prices in the world market.

Arrivals

Currently, the country is waiting for the break of south-west monsoon usually due in early June. By end-May, cotton arrivals from the last harvest had reached close to 310 lakh bales. The revised production estimate of the Cotton Advisory Committee is 315 lakh bales. Export of Indian cotton has reached a new-high.

Estimates

According to the latest estimate, it could well be about 85 lakh bales for the whole season, an extra-ordinary performance by any measure. Growers have been the beneficiaries of this effort and they are likely to respond by planting more.

Prices

Cotton prices in the domestic market spurted by about 15 per cent in recent months. Exports supported prices. The opening price for the next season is likely to start high. If the recent weakness in rupee sustains, it would help boost cotton exports.

Forecast

Meanwhile, international cotton prices are forecast higher for 2008-09. According to the Washington-based International Cotton Advisory Committee (ICAC), the season-average Cotlook A-Index in 2008-09 would be 79 cents a pound, six cents higher than the expected 2007-08 average.

Going by experience, cotton prices may range between a low of 70 cents and a high of 90 cents a pound in the ensuing season. The projected price increase is due mainly to an expected decline in stock-to-mill use ratio in the world-less-China.

Consumption

In the world market, cotton output is forecast to trail consumption in 2008-09 as a result of which stocks are expected to be drawn down. This is sure to impact prices.

In the competition among crops (corn, soyabean, wheat) for acreage, especially in the US, cotton is likely to lose out once again. Therefore, world cotton output runs the risk of a decline to 25.9 million tonnes in 2008-09, versus 26.2 millon tonnes in the previous year.

At 26.7 million tonnes, world mill consumption, however is expected to remain stable following slower world economic growth and higher prices of cotton relative to polyester.

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