By admin       2016-09-26

September 25, 2016 - Cotton futures gained almost 50 per cent between March and July, triggered by short supply in the domestic market. The price had touched a peak of ₹23,570/bale (1 bale=170 kg) in July and is currently at ₹20,530/bale. Cotton prices moderated in August on reports of favourable weather in top producing nations such as India and the US. However, concerns over depleting stocks, higher consumption demand and prospects of better US exports limited the extent of price correction. Global supply and demand: The USDA puts global cotton output at 20.99 million tonnes (mt) for 2015-16 (August-July), 19 per cent down over 2014-15. With lower production and almost the same level of consumption, carry-forward stocks have reduced noticeably to 21.45 mt in 2015-16, down for the first time since 2010-11. However, the global output situation is expected to go up to 22.31 mt in 2016-17 with likely higher produce from the US, Pakistan and Australia. The USDA reports that consumption of cotton is expected to exceed production by 1.9 mt in 2016-17. Higher consumption is attributed to increased domestic demand from China, Bangladesh and Turkey. Import restrictions in China, accompanied by rapid expansion of the Bangladeshi textile sector over the years, have catapulted Bangladesh to the slot of top importer of cotton.China factor: Lower price realisation along with increasing preference for food grain crops in China has led to a 36 per cent decline in its cotton acreage in last two years alone. China’s cotton production is estimated at 4.57 mt in 2016-17 against 6.53 mt in 2014-15. However, its cotton consumption demand is expected to remain firm in 2016-17 due to lack of quality stocks in government’s reserves, decreasing stocks amid reduced production and lower imports.Domestic scenario: Despite India having the largest sown area and being the largest cotton producer, its productivity remains amongst the lowest. Lower acreage, yield and inferior quality have bought down the stocks significantly. The resistance of GM cotton against pests like whitefly and disease of leaf curl virus has prompted farmers to switch to pulses and oilseeds. The cotton industry seems divided over the production estimates for 2016-17. The Cotton Association of India (CAI) expects almost the same output at 33.6 million bales in 2016-17 (October-September) against 33.77 million bales of 2015-16 while demand is forecast at 30.8 million bales. The millers, however, expect production to go up by 4-5 per cent over last year. As per government data, the acreage under cotton is 10.2 MHa till September 2, 11 per cent down from 2015-16. Maharashtra experienced one-and-a-half month’s late sowing amid delayed monsoon yet the acreage may increase due to adequate soil moisture and decreased threat of pests. However, the doubt over the impact of delayed sowing on yield remains. Clarity on this will come only after the quality of first picking is observed which is due in November-December. India’s exports are expected to be at the lowest levels since 2008-09 impacted by lower domestic stocks, expected noticeable drop in imports by Pakistan and continued decline in export to China. The domestic cotton market looks to trade in range with slightly firm tone on rapidly depleting stocks and lower production prospects. However, somewhat bleak export outlook and hopes of higher imports are likely to restrict any sharp gains in cotton market. We may witness good corrections during the arrivals season. Watch out for the planting progress, growing conditions and weather. Similarly, the global cotton market is likely to remain range- bound with upside risks on expectations of higher production from top growing nations, except India, while lower global inventories and robust Chinese demand will limit downside risks.

Download App

# #

Member Login