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Export price outlook bright for Indian cotton

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Views differ on whether China will continue to drive up global consumption

G. Chandrashekhar

Mumbai, Sept. 4

Is China's cotton consumption set for a slowdown? Opinions differ. The outlook for world cotton prices in 2006-07 will depend almost entirely on how much the Asian giant import during the year to fuel the growth of its textile industry.

China's textile industry will continue to drive world cotton use in 2006-07.

The country's consumption is projected to rise to a record 10.5 million tonnes, up 6-lakh tonnes from the previous year, even as imports are set to register new highs during the year.

Its imports for 2006-07 are initially forecast at 4.2 mt. However, consensus is now emerging that actual imports during the year may be somewhat higher than the initial expectation. Imports may go up to anything between 4.8 mt and 5 mt representing over 50 per cent of global exports.

Global consumption is expected to exceed production during the year by one mt, which will get reflected in the drawdown of global stocks, according to Washington-based International Cotton Advisory Committee.

While the world consumption is forecast at 25.7 mt (up 3 per cent from previous season), production is expected to remain stable at 24.7 mt. An increase in output forecast for China, India and Pakistan will be almost entirely offset by decline elsewhere, most notably the US.

Indian crop conditions

Indian cotton crop conditions are looking healthy. There have been reports of crop damage in central India due to excessive rains; but estimates of the quantum of loss vary. But the consensus is that despite some losses, output would be not less than 260 lakh bales, a new high.

This would be the fourth successive year of record production in the country. Together with a large carry-in, such a level of production would make supplies aplenty.

Export avenues

Firm international market has opened up export opportunities for Indian cotton. Trade representatives are optimistic of shipping out 50 lakh bales in 2006-07, a quarter higher than in the previous season's 40 lakh tonnes.

Domestic consumption and exports together would continue to support the domestic market and prevent a collapse of prices due to large supplies.

(This article was published in the Business Line print edition dated September 5, 2006)
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