The Hindu Business Line : Global cotton prices robust, limited benefit to India

The global cotton market is booming. Rising consumption, record exports and large inventory with prices attractive to producers are the major features of the market this season. Yet, cotton growers in India are unable to reap the full benefit of robust international prices.

For the second year in a row, global cotton consumption - though on the rise - has been trailing production, leading to build up of inventory.

Despite this, prices have remained firm primarily because of huge import demand from major users such as China. Indeed, but for such demand surge, prices would have collapsed.

For 2005-06, world cotton exports are projected to reach a new high of nine million tonnes (mt), according to Washington-based International Cotton Advisory Committee (ICAC) which expects that in 2006-07 world production and consumption would remain finely balanced, leading to a further rise in prices.

World cotton supplies next year are projected to grow for the third successive year to a record 36.7 mt, including an opening stock of 11.2 mt, and exports to remain at a healthy 9.0 mt.

Cotlook A-Index, a principal measure of international cotton prices, is projected to average 61 cents a pound in 2006-07, up slightly from the current year average of 58 cents and a sharp increase from 2004-05 average of 52.2 cents a pound.

For the second year in a row, India has harvested a record cotton crop estimated at around 250 lakh bales (170 kg). With an opening stock of about 70 lakh bales, indigenous supplies are a record 320 lakh bales.

Market arrivals have already crossed 200 lakh bales. Stocks are becoming burdensome with some private estimate placing the figure at an over 150 lakh bales. After long years, cotton exports from the country have gathered momentum.

While shipments till end-March were an estimated 25 lakh bales, market men see the distinct possibility of further shipments of at least 10 lakh bales.

China, Bangladesh, Pakistan, Indonesia and Thailand are the destinations for Indian cotton.

Despite record exports, cotton growers in many regions are far from happy because of lower-than-expected price realisation. A glut situation is seen capping price rise. Procurement operations of Cotton Corporation of India and Maharashtra Federation have delivered benefit, but to a limited extent.

Quality considerations do play a part in pricing. As the next planting season is fast approaching, a quality-related production plan is necessary.