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G. Chandrashekhar

India growers, exporters could benefit

Mumbai April 4

Global cotton outlook for 2007-08 is developing to be immensely beneficial for Indian cotton growers and exporters. As the cotton market moves away from the 2006-07 season, interest is increasingly focused on the next season. Players around the world have already begun to discuss market fundamentals for 2007-08.

Signals for export surplus in the US and China's import requirement in 2007-08 will be watched closely. In a market with fairly balanced fundamentals, even a small change in either supply or demand would impart a disproportionately larger price impact.

Without exception, Indian market participants too are watching developments.

No change in output

The numbers for 2006-07 all seem to be in place. Of the estimated output of 265-270 lakh bales, arrivals so far are estimated at about 240 lakh bales.

The forecast of southwest monsoon and its onset by early June will be monitored closely.

As the world cotton market goes through a period of lull and waits for market-making factors to develop over the next 4-6 weeks, the Washington-based International Cotton Advisory Committee (ICAC) says world cotton production in 2007-08 would be largely unchanged from the previous year.

Interestingly, however, production in China is expected to decline slightly to 6.5 million tonnes (mt), still the second largest up to date, while production is the US is forecast to be down 10 per cent to 4.3 mt.

On the other hand, ICAC expects a slight increase in India to a record 4.7 mt.

Should these forecasts materialise, it would mean a fabulous season for Indian cotton growers and exporters.

Both demand side and supply side forecasts favour Indian cotton.

A 10 per cent decline in US cotton output would translate to so much lower export surplus and a decline in China's crop would translate to higher import requirement.

Rare opportunity

India must ready itself to face and benefit from a rare opportunity to increase output and generate enough surplus of good quality to cater to export demand.

For the policymakers and input suppliers, it is time to support the cotton grower by ensuing timely supplies of appropriate inputs.

Global consumption

World cotton consumption is projected to increase by 2 per cent to 26.7 mt in 2007-08, driven mainly by Chinese mill use.

China's imports are expected to rebound, as a result of which world cotton trade will expand to 9.2 mt (8.5 mt), according to ICAC.

With world production set to trail consumption by 1.5 mt, stock draw-down is inevitable. It is a sure recipe for a price spike.

Cotlook A-Index, an indication of global prices, is forecast to average 62 cents a pound in 2007-08.

In reality, the market can potentially spike up to a peak of 75 cents a pound on occasions.

More Stories on : Cotton | Exports & Imports

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