The Hindu Business Line : Big opportunity coming India's way in cotton

On the up
World cotton consumption in 2006-07 is expected to go up from 24.9 million tonnes last year to 25.8 million tonnes
Cotton exports are forecast to set a new record at 9.4 million tonnes up from 9.3 million tonnes last year

Mumbai , July 5

With annual output likely to trail consumption demand in 2006-07, world cotton market fundamentals are turning producer-friendly. The market is poised to witness strong prices in the coming months after being relatively more consumer-friendly for two years.

For 2006-07, Cotlook A-Index - representative of the level of offering prices on the international raw cotton market - is forecast to average 63 cents a pound, up sharply from the previous year's average of 56 cents.

Positive on cotton

Unsurprisingly, at the New York Board of Trade, investors have turned positive on cotton, buoyed by expectations of further growth due to a large import demand from China to meet its textile sector raw material needs.

While world cotton consumption in 2006-07 is estimated at 25.8 million tonnes (up from 24.9 million tonnes), world production is likely to remain unchanged from the previous year at 24.8 million tonnes, according to the International Cotton Advisory Committee (ICAC).

New record

World cotton exports are forecast to set a new record at 9.4 million tonnes (9.3 million tonnes) driven primarily by Chinese cotton demand. The US would be the largest beneficiary for the second year in a row with exports expected to set a new high of 3.7 million tonnes, that is 40 per cent of world exports, ICAC said. As a result of rising consumption and stagnant output, world ending stocks of cotton are sure to decline to a recent low of 9.9 million tonnes.

Tightening world supplies, robust export market and strong prices are sure to prove positive for Indian cotton. Experts tentatively place the crop size at about 250 lakh bales, subject of course to normal weather.

If realised, it would be the fourth successive season of large crop. The opening stock for the ensuing season is estimated at anything between 75 lakh and 80 lakh bales.

Export opportunity

Firm world prices are sure to open up attractive export opportunity for Indian cotton. Achievement of 50 lakh bales export during 2006-07 season is within reach. In the previous season Indian exports were an estimated 35 lakh bales.

Obviously, a big opportunity is coming India's way in the form of favourable world market conditions with higher exports and firm prices. This should prove positive for growers, in addition to the relief package announced by the government. Policymakers and trade must together seize the opportunity.